It’s not just those struggling to break into the property market that need to cut back on smashed avocado with crumbled feta on five-grain toasted bread.
Interest rates might be at record lows, but delinquency rates have hit record highs in Western Australia, Tasmania and the Northern Territory.
In South Australia, delinquency rates are just 0.1 per cent shy of the record.
The housing bust in Western Australia and wage deflation has contributed to mortgage arrears hitting 2.33 per cent, surging 0.69 per cent in the past year.
Nationally, delinquencies have risen in every state and territory.
The number of delinquent mortgages in Australia is at three year highs and is likely to rise further, according to Moody’s Investors Service. Mortgage holders more than 30 days late on their mortgage currently stands at 1.5 per cent, and is nudging towards the 1.59 per cent record recorded in April 2013.
Australians have the highest level of household debt in the world.
» Mortgage arrears break records in two states and NT – The ABC, 19th October 2016.
It’s all states that this is happening to,the places you mentioned in this article are perhaps showing a higher percentage due to the unemployment levels in these states/terratories.
I currently work in debt collection for one of the smaller banks and what I see on a daily basis is frightening.
The amount of people who are claiming for early super release under hardship grounds to cover mortgage arrears is HUGE!
I regularly speak to people so stressed by their financial situation they are often in tears.
Once unemployment starts increasing across the Country and it will, it’s already happening,the shit will really hit the fan!
The crash has started, believe you me.
No sympathy for them at all if they are investors. They should pay the consequences for being gullible to listen to a corrupt government along with their banking and real estate sector cronies. Cant wait to buy the investors houses at half price soon. Pay back for millions like I who pay rent, unwilling and unable to pay for their highly inflated and way overvalued prices for their houses they bought just so they can make a fortune that is subsidized by taxpayers money.
Yes, there were certainly no tears when they were ramping the rent up year after year..
Must admit I don’t have a huge amount of sympathy for the greedy, financially illiterate ones either.They are responsible for signing the loan documents for multiple mortgages.
I do, however feel for the genuine people who have unfortunate events like sudden illness or unemployment and it causes all aspects of their lives unravel.
Like it or not,this Country is heading into a massive economic slump.
Cant wait to buy the investors houses at half price soon.
Good plan Theo, except the banks will hold onto them until they can get their money back.
Unless the crash is so big it brings it all down, best hope to still have a job at that point.
And the housing will be cheap, real cheap.
@ Mark
No, the banks have no interest in holding property. They will mortgagee auction the place to their mates. The difference they can then chase from the original owner, and/or they’ll chase a bail out from the gov’t or a bail in from depositors.
If the banks wanted to owner property, they never would have allowed the public access to loans to buy them. Bankers only have two goals:
A: Get money from lending
B: Get money from bail outs.
Both AKA money for nothing.
@ Matty,
Last line a beauty! Big Dire Straits/Knopfler fan here.
Which is a big Segway for a conversation down the track regarding idiot neighbors that payed $938,000 for a 3br unit above me (my grandfather paid $45,000 outright for this property in cash in 1986). Now I have strata issues. Massive ones.
Thanks and many to the Neo-entitled.
@Sarah,
Anecdotes such as yours from your experience in debt collection are very helpful in letting the rest of us know how this is playing out on the ground. Won’t hear stories like yours in mainstream media!
Out of interest which state do you work in?
@Mark-many people are already out of a job(link below) and yet house prices are still going up. The only reason the rest of us are working is because the economy employing us is debt fuelled thanks to corrupt politicians who are allowing the production industry to close ie-car manufacturing is just one and instead is concentrating on making Australia a Real Estate Agency paradise. But what is worse are the hopeless voters who still support the same politicians and parties that lie time after time for years. The average Aussie family is the most heavily in debt of the industrialized nations. So we will lose our jobs eventually anyway. It will be difficult in the short term. Eventually, manufacturing will come back to life again and provide us with real, long term productive jobs. At least I will be debt free. Will you?
http://www.roymorgan.com/findings/6739-roy-morgan-unemployment-estimate-march-2016-201604070750
@9 Theo
The jobs will only come back after massive IR reforms. No multinational will invest in Australia for manufacture while we have expensive:
Superannuation
Workcover
Holidays (with leave loading for the love of god)
Sick days
Maternity leave
38hr limited week
penalty rates
10 paid public holidays
I’m sure there’s more.
And one of the poorest work ethics around it seems. Try employing someone these days, it’s unbelievable what these idiots think ‘working’ constitutes.
Political correctness is out of control. OUT OF CONTROL.
Oh well, pad your nest, it’s all you can do.
Antony,
Yes, it certainly is an eye opener to what’s going on out there.
I work in QLD and we service all of Australia.
There are so many delinquent accounts on referral that we cannot keep up with the work load!
The worst affected states are WA, NT,Tassie all regional areas, mainly where the unemployment rate is quite high.
Many people are really screwed,not only are they unable to find tenants in many cases but they are also finding they can’t sell either. Obviously people cannot borrow ludicrous amounts of $$$ without income.
It’s only a matter of time until the other more populated states see mass carnage.
Also, another thing I’m noticing is many people are wanting to refinance onto interest only loans and banks are declining applications. When customers need to consider this as an option when interest rates are at historical lows is really telling. So many people are hugely over committed and are scratching for solutions and realising they’re stranded in the middle of nowhere without any fuel.
Thanks Sarah.
@Matty
You seem to be leaving out the real slackers in our society in your criticism of Australians work ethic… the rentiers. It is a race to to bottom for workers while the rentiers, who do SFA, extract more and more from what should be the circular flow of money between industry and labour.
The truth is that big business have sent manufacturing overseas where they can exploit workers for larger profits. The Australian workers are sick with stress from large mortgages, or if they’re young have given up because they know the system has been rigged.
How can you compete with someone who pays a 10th of the rent you do and how can you take politicians or corporate leaders seriously when they troll us with bs about lifters and leaners.
It’s not IR reform we need but tax reform. Reduce tax on labour and industry and increase it on rent (unearned income).
Why do we want multinationals here anyway. They’re tax cheats and labour exploiters who subvert democracy via campaign financing and lobbying and who extract tax payer funds and subsidies from sweetheart deals through their political connections.
@Sarah,
Sounds like you’re in a booming industry. Please keep posting updates!
Of particular interest to me is when Sydney/Melbourne get affected. With all the various job losses (especially in full time work) it shouldn’t be too long for the contagion to spread from regional areas to the metropolitan.
Thanks again for your insights.
The sour reality to all this is that people who are waiting in the wings to buy a place once it becomes affordable will need more cash than ever at levels of completely stagnated wage growth and high levels of unemployment.
NAB have already blacklisted some suburbs to 70-80% LVR because of the ridiculous amount of dogboxes being built, Brisbane , Sydney and Melbourne apparently have more cranes working on residential construction projects than anywhere in the world.
In an extremely tight credit environment, which is coming, there is no way for these prices to go except down.
Antony,
I wish all the readers on this blog could come to work with me for week and you’d definitely have your suspicions confirmed about the state of the economy.
Like I said, I only work for a small player so the big 4 would easily have x10 more delinquencies on their books in my opinion.
I spoke to a young guy in Sydney not that long ago, who had over $800k in MTG debt and his interest only period had ended (he thought interest only was for the whole term of the loan)
He went to the bank to change back to IO but due to the fact he was in arrears, he was unable to refinance his contract.
He said to me, I cant afford P&I what can I do? I suggested a financial councillor because we can advise them one way or another.
But I felt like saying, did you understand the contract you signed? Do you own a calculator? Did you do you due diligence/research before you signed up for this debt? This type of customer is more common than you would imagine.
It is really frightening.
Sydney/Melbourne will happen,just may take slightly longer but trust me, a large part of our Country is under huge social/economic stress.
Im am an Ausy living in Canada for the last 2 years. The same issue is happening here, people are speculating the market will never crash due to their ” superior Canadian banking regulations”, also immigration and foreign investment pushing up house prices, BS. Cookie cutter homes in the suburbs of Toronto are being sold in under a week for over 1.2 million, Insanity! The economy is struggling with low commodity prices. Retail and manufacturing forecasts falling short. Its only a matter of time before the whole house of cards comes falling down.
I haven’t been paying much attention to the Australian economy until my parents were telling me how the house prices around them in Far North Coast of NSW are getting out of control. I took a look on online at a few properties around the area. A 2 bedroom apartment was going for 700K in an area with little job opportunity. I was blown away. Looks like Australia is in a really bad position with interest only mortgages and negative gearing. A lot of people will be loosing their shirts in the near future. My first house purchase will hopefully be a foreclosure from an over leveraged greedy “Real estate Investor” .
after all these, one would expect this to slow down, yet the clearance rate is 85%% !!!! when does it end…!!!
@strangeworld – Auction clearance rates have been fudged for a number of years now.
http://www.news.com.au/finance/money/auction-rates-fudged-by-failed-campaigns/story-e6frfmci-1226016477643
@strangeworld auction clearance rates are rubbish. I was looking at some of the results and they had the gall to include such things as a private treaty sale from several days prior to the weekend in question as a successful auction result for that weekend. What a joke!
I currently view the bogus 80+% rates being reported as a sign of desperation to try & squeeze the last FOMO dollars out of unsuspecting prospective purchasers.
House prices/rents may be falling in the mining states like WA and QLD, but Sydney prices are still going nuts.Today when I was at the local shops, I gave a cursory glance at the window of one the local Real Estate agents, and it was advertising a rental unit for $540.00 per week!!
Bear in mind that this unit was the wrong side of fifty years old, was in need of work, and was not in a middle or upper class area, it was a dump. I recall reading an article in the Sydney Morning Herald stating how people in Sydney on average incomes could no longer afford to rent in outer suburbs like Blacktown.
How long is the property bubble insanity going to last?, and the next generation of Australian young people have NO HOPE of entering the property market (based on current prices).
@ Master Yoda
For a bit of context, how many bedrooms & which suburb was the rental in?
(My own cursory observations seem to show rents falling & r/e agents increasingly offering incentives like a week’s free rent or a gift hamper)
@22
The unit was in Campise, and it was for a 2 bedroom unit, I can’t recall if there was a lock up garage or outdoor car spot.
@ Master Yoda it will go on as long as banks lend and the acceleration in debt fuels it in what is a ridiculously cheap credit environment.
I posted this below in another thread, look what happened June 2015 , this is when Sydney and Melbourne really starting making headlines.
Source:APRA
Mar 2010 934
Jun 2010 1,103
Sep 2010 1,163
Dec 2010 1,218
Mar 2011 1,116
Jun 2011 1,360
Sep 2011 1,484
Dec 2011 1,366
Mar 2012 1,309
Jun 2012 2,053
Sep 2012 1,997
Dec 2012 2,299
Mar 2013 1,973
Jun 2013 2,480
Sep 2013 2,150
Dec 2013 2,443
Mar 2014 2,224
Jun 2014 2,877
Sep 2014 2,695
Dec 2014 3,211
Mar 2015 2,875
Jun 2015 4,510
Sep 2015 4,068
Dec 2015 4,233
Mar 2016 3,599
Jun 2016 3,484
Private debt has decline all year, people are borrowed to their teeth, its on its last legs unless the government introduces new policy to keep it going.
By the way, I should’ve mentioned, those figures above represent the number of new mortgages that were approved with the borrower outside the service/affordability criteria.