A report from the University of Melbourne Centre for Corporate Law and Securities Regulation shows bankruptcy is rising and becoming a “middle class phenomenon” in Australia. The main cause of bankruptcy in the middle class has been due to unsustainable home loans. Insolvents are increasingly from professional and higher status occupations with rising asset and property ownership levels.
ยป Rise in middle-class bankrupts – The Sydney Morning Herald, 24th May 2010.
Recovery – what recovery? The global economy in 2009 was like a terminal cancer patient on chemotherapy. Great for a while until the cancer returns with increased aggresiveness. Hold onto your hats folks!
The housing market correction is inevitable.
During the GFC the housing market was at least supported by generous first home buyer grants and eager foreign investors.
Now both of them are gone.
The worst to be affected will be Perth. The front cover of the Western Australian (WA’s major newpaper) on Saturday was “New Minister wants to flood WA with land”.
“It owns land and it is looking at its land stocks and will release as much land as possible.”
Finally a government which will address the supply issue that the RBA has been speaking of for so long!!!
Unsustainable mortgages are becoming a real issue. I read comments from Thorn Group CEO John Hughes (Who owns Radio Rentals) that people on six figure salaries are renting more and more appliances and white goods. He says “They may be people on two incomes … earning $100,000 a year but they are heavily mortgaged, … They can’t afford to go out there and buy a brand new washing machine (or) refrigerator and they fine rental as a very good alternative”
It’s a sad day when so much of the household budget is spent on housing expenses, that there is no money left over for anything else. But it does seem there is little more elasticity in this bubble – It can’t stretch much further.
Australians must live in a world of the own……. the OECD has released statements today that conflict heavily with what residential realestate “investors” over here seem to believe….
“The international organisation’s Economic Outlook, released overnight in Paris, predicts the Reserve Bank will push up its cash rate from its present 4.5 per cent to 5.1 per cent by December and then to 5.7 per cent by next June.”
and to cap it off the OECD today said :
“The prediction is sharply at odds with that of Australian financial markets, which have priced in a tightening of only 0.25 per cent in the year ahead. The 120-point rise, if fully passed on, would push up standard variable mortgage rates from their present average of 7.4 per cent to 8.6 per cent, adding an extra $238 to the monthly cost of servicing a typical $300,000 mortgage and $318 to the cost of servicing a $400,000 mortgage.”
“The total extra costs since rates began climbing from their lows last October would be $540 a month for a $300,000 loan and $720 for a $400,000 loan.”
An extra $720 a month?…….. good luck fellas, glad it’s your “investment” and not mine.
The illusion that “it’s different this time” or that Australia is detached from the rest of the planet orbiting at a safe distance while watching Rome burn can only run on for so much longer. I figure there is really going to be some blood in the streets accompanied by little sympathy from those who had the sense to stay out of this mess.
It blows me away that people are surprised that rates could rise much further, we are currently at historic low levels. Point in case, the average cash rate from 1994 to 2008 was 5.8% which indicates that the current 4.5% has a ways to go
http://www.globalfinance.com.au/interest_rates_australia.htm
To be fair to that OECD report, as recently as three weeks ago, interest rate futures markets were pricing in an additional 100 basis points of tightening between now and June 2011. Bill futures markets have rallied strongly since then, with the June 2011 contract getting to nearly the same level as the June 2010 contract – i.e no increase in rates. The June 11 has since backed off and now is pricing in about 40 basis points in increases over the next year.
I wonder just how long it will take for Australians to work out that when the price of houses begin to stall yet they are still forking out on huge debt repayments that they have become stuck in a trap that could take them the next 20 years to recover from? Super high house prices vs incomes leads to a sad life of debt and stress! Wake up people!!
Funny, it’s still not happening where I live (Brisbane).
Houses are still selling within a fortnight and the prices are still going up (but not as fast as before).
Sorry guys but I dont see the Housing Crisis going away anytime soon unless firm changes are made like capping population growth and reducing the Negative Gearing Scheme, which as we all know will never happen.