Don’t worry about peak oil, now a new house price surge is predicted which in the words of property analyst, Michael McNamara, will bring “Peak Debt”, when mortgage repayments outstrip disposable income.
Australian Property Monitors predicts that in the next decade many in the mortgage belt of “average Australia” will reach a point where they are unable to put food on the table because loan repayments swallow their incomes.
The general manager of Australian Property Monitors, Michael McNamara, said he coined the term “peak debt” to echo the “peak oil” theory, which suggests the production of oil has peaked and is running out. Likewise the capacity to borrow will simply run out, he claims.
Meanwhile the Brisbane times reports :
Australia is fast approaching peak debt. By 2016 we will spend so much of our discretionary income on mortgages there will be nothing left for putting food on the table.
This comes to a similar conclusion to what we forcasted in February this year. Based on Adelaide home prices and wage data, we suggested in September 2007 100% of your wage would go to service the mortgage.
» Home prices set to surge again, fuelling debt crisis – Sydney Morning Herald, 3rd July 2007.
» Brakes fail on housing stress – Brisbane Times, 3rd June 2007.
It is very sad that none of the mainstream parties are suggesting the simple solution – house prices must come down. Or at least stagnate for 5-10 years. They talk about lowering interest rates, or better saving schemes, so people can afford the current high prices and investors can continue to obtain record, unsustainable growth.
Well I guess it doesn’t matter. The laws of supply and demand will reign in house prices, no matter what the pollies and investors would like us to think. When the money supply tightens, house prices will drop in real terms. It’s a form of education for the historically inept.
Anyone who lived through 17% interest rates of the late 80’s and stagnation of Adelaide real estate in the 90’s has seen it all before. Perhaps they need another lesson?
This is an excellent documentary on household debt in the US “Maxed Out” , might be worth a post:
http://video.google.com/videoplay?docid=1897719170688776201