House prices to stagnate for 'years'

[Julia]

For those who are more defensive, they should also not invest in stock market but put ALL their savings in fixed term deposit to get rich. The only trouble is, don't forget the reason for the rate hike is INFLATION, which will destroy your fix interest. So why bother.

Good heavens, toothfairy, if we can't do better in the sharemarket than in a term deposit, then I guess, no, we should not in fact be in the sharemarket!

 

[Happy]

From ABC, 30 Oct. 07, By business editor Peter Ryan


MORE AUSTRALIANS DEFAULTING ON MORTGAGES


A new report says more Australians are struggling to repay their mortgages. With the next critical meeting of the Reserve Bank only a week away, there is fresh evidence of growing mortgage stress across Australia.
While an almost-certain interest rates hike will add to the woes of families in mortgage belt suburbs, a new report is now showing rising defaults in regional Australia.
Hardest hit is regional New South Wales where the drought - in addition to fives rates rises since the 2004 election - has pushed defaults up 60 per cent over the past year.

The credit stress in New South Wales is reflected in other states with defaults in regional Victoria up almost 52 per cent, South Australia 50.5 per cent and Queensland 42 per cent.
The bleak outlook comes from the credit reference agency Veda Advantage, which says more households also are defaulting on credit card and utility bills.
Veda Advantage external affairs chief Chris Gration said the new data demonstrates a growing "debt divide" in Australia.

"We appear to have in regional Australia and in the mortgage belt suburbs in part of the capital cities a much greater sense of financial stress," he said.
"The drought effect on regional Australia is quite significant so I think we can infer that families in regional Australia are certainly suffering because of the effects of the drought."
Mr Gration says the survey also shows that in addition to defaults on mortgage payments, Australians are failing to pay credit card and utility bills on time.
"One of the things about Australians is that families make their very best effort to pay their home mortgage," he said.

"The home mortgage is the last thing a family will default on. So the rise in defaults is a sign that we have serious financial stress in part of the country."
The report also found that stress in mortgage belt areas in suburban Australia are also on the rise with NSW 43.5 per cent, Queensland 44.4 per cent and Victoria 40 per cent.
Mr Gration refused to speculate on the impact of an interest rate rise following the next meeting of the Reserve Bank board, but said almost half of the families surveyed are concerned about another rates hike.

"Our concern is going into what is a possibly tight credit cycle over the next 12 months, Government needs to take action to protect both borrowers and lenders," he said.
"We're calling for the Government to act swiftly next year to ensure that borrowers and lenders get the best credit information and that there's stronger consumer protection."

I don’t want it to make sound trivial, but not knowing exact number of defaults; report looks deliberately making it sound bad.
We instantly feel that 50% is a big jump, but if it is jump from 200 to 300 on 500,000 loans, despite being traumatic for people involved, it is relatively small percentage of total number loans.

Does anybody know the numbers behind percentages to have better perspective?

 

[numbercruncher]

Looking for numbers, but this may help ...

AUSTRALIA'S insurance regulator has drawn attention to a spike in the number of stressed homebuyers, confirming that claims for mortgage defaults soared by 329 per cent in the year to December.

Home lenders lodged claims for $210 million worth of bad loans in the 12 months to December compared with only $49 million in 2005, according to the Australian Prudential Regulation Authority.

http://www.news.com.au/business/story/0,23636,22202830-462,00.html

 

[KIWIKARLOS]

i dont think that the defaults are a wide spread problem rather just pockets, i would imagine there are very few defaults in port headland :

 

[numbercruncher]

Its pretty hard to find this info, as there is no like national register, maybe intentionally ?

heres some info though, seems to point to the default rate rising this year since my last post showed to dec 06.

The total Australian "prime" loan book of $169 billion in securitised mortgages had a technical default rate of 0.5 per cent in June.

so that points to 850m in default in the "prime" mortgage market.

But sems much worse as a percentage in "subprime" (lowdoc etc)

MOBIUS FINANCIAL SERVICES, a division of Allco Finance Group, is the worst-performing subprime lender in Australia, with more than 15 per cent of its $680 million loan portfolio in technical default.

Pepper had the lowest subprime technical default rate (3 per cent), followed by Bluestone (6 per cent), Adelaide Bank and Challenger (both 7 per cent) and Liberty (8 per cent).

http://www.smh.com.au/news/business/allcos-mobius-has-highest-default-rate/2007/10/03/1191091194051.html?s_cid=rss_business

So using these figures defaults look set to skyrocket again in relation to the 12 months to last december.

They really need to introduce some transparency or national database with these figures, would be an interesting insight to the health of things.

 

[algis]

Its pretty hard to find this info, as there is no like national register, maybe intentionally ?

heres some info though, seems to point to the default rate rising this year since my last post showed to dec 06.



so that points to 850m in default in the "prime" mortgage market.

But sems much worse as a percentage in "subprime" (lowdoc etc)



http://www.smh.com.au/news/business/allcos-mobius-has-highest-default-rate/2007/10/03/1191091194051.html?s_cid=rss_business

So using these figures defaults look set to skyrocket again in relation to the 12 months to last december.

They really need to introduce some transparency or national database with these figures, would be an interesting insight to the health of things.

Check Box B of the Sept 2007 Financial Stability Review from the RBA:

http://www.rba.gov.au/PublicationsA...p2007/Pdf/financial_stability_review_0907.pdf

0.4% of securitised prime loans are more than 90 days in arrears. The trend appears to be in line with interest rates. However, between 0.3% and 0.4% of loans were more than 90 days in arrears back in 1997 (what was the standard variable rate back then?). Otherwise it is broadly unchanged from 2006 after increasing in 04 and 05.

Close to 1% of low doc loans are more than 90 days in arrears.
Over 6% of non-conforming loans are more than 90 days in arrears.

Interestingly, over 0.6% of loans are 90 days in arrears in NSW compared with less than 0.4% in other states.

5368 application by banks for possession of residential properties in NSW in 2006, equivalent to 0.23% of private dwellings. This is up from a bit over 3000 applications in 2004.

The Fairfield/Liverpool region in Sydney tops the number of applications for possession in 2006 at close to 0.5% of properties. Northern Beaches is lowest at a bit under 0.1%.

From the text:

A comparison of applications for repossession in NSW, relative to the State’s number of
dwellings, and arrears rates since the early to mid 1990s reveals that, over this period, there
has been an increase in the number of repossessions for a given number of loans in arrears.
Over the same period, there has been a significant increase in the relative importance of ‘non
traditional’ lenders, and liaison suggests that these lenders act relatively quickly to obtain and
execute repossession judgments.

And some good news (averaged out):

Even
allowing for the increase in interest
payments, real disposable income
averaged across all households has
grown at an average annual rate
of 2 per cent over the past decade,

 

[KIWIKARLOS]

why would they skyrocket in oz our market is completely different.

Low doc loans are not "subprime" most of the people on these loans are on good money its just they work for themselves or own their own business. Lending standards in oz have been much harder than in the US.

Plus there are no adjustable rate morgages, such there are honeymoon periods etc but not like the US where your rate goes from 6 % to 10 % overnight !

another thing is that there are alot of loans in the US where the morgagee doesn't have liability for the home if they foreclose they can just hand over the keys to the house and walk away they dont actually owe the difference between the loan and the potential sale value of the house.

 

[KIWIKARLOS]

plus the % we are talking about here are tiny compared to the figures in the US. double didgit declines in value. MILLIONS of homes in inventory to sell. More jobs been lost than created, their wages are stagnant while ours grow.

 

[Temjin]

plus the % we are talking about here are tiny compared to the figures in the US. double didgit declines in value. MILLIONS of homes in inventory to sell. More jobs been lost than created, their wages are stagnant while ours grow.

Just make yourself aware that we are in the midst of a great credit and resource boom and unemployment rate has been all time low.

We shouldn't EVEN be expecting such unusually high defaults on mortgage and with signs on more and more people are facing serious financial stress.

I wouldn't bet that our housing market will not be affected by the credit crisis or any decline in growth from either the US or China exporting less due to demand drop from the US.

 

[toothfairy]

Good heavens, toothfairy, if we can't do better in the sharemarket than in a term deposit, then I guess, no, we should not in fact be in the sharemarket!

I was just being funny and having a go at people who worries about interest rates too much. I have plenty of shares, even buy them on borrowed money.

 

[robots]

hello,

http://www.tradingroom.com.au/apps/view_article.ac?articleId=143074

he has to be right, this guy is a senior economist, just like steven keen, who is/will be closest to the pin as such

the gov might have to start giving tax concessions to people who choose to work in the building industry to get the numbers up,

thankyou

robots

 

[numbercruncher]

Im glad to see this thread is atleast starting to recognise that a problem exists that needs attention asap

 

[kgee]

why would they skyrocket in oz our market is completely different.

Low doc loans are not "subprime" most of the people on these loans are on good money its just they work for themselves or own their own business. Lending standards in oz have been much harder than in the US.

Plus there are no adjustable rate morgages, such there are honeymoon periods etc but not like the US where your rate goes from 6 % to 10 % overnight !

another thing is that there are alot of loans in the US where the morgagee doesn't have liability for the home if they foreclose they can just hand over the keys to the house and walk away they dont actually owe the difference between the loan and the potential sale value of the house.

Not sure about that, I went in for a low doc loan and they were throwing money at me...all I needed to show was a bank deposit and last years tax statement....the fact that I hadn't worked in the last 6 months was never looked at....and they were throwing some pretty big money towards me

 

[Tysonboss1]

It should be the right of every Australian to be able to afford a house.

And just about every Australian can afford a house,... Just not in a capital city,

Look at any of the major capital cities in the world,..... they have all become unaffordable at some stage,.... do you think the average family can afford a 1/4 acre block with a 4 bedroom house on it in londan, new york, tokyo or paris.

It is completely normal as cities grow that they will become unaffordable firstly to the low incomes then medium incomes and so on until they get to the stage that even rents are unaffordable and rent control legislation must come in.

 

[Flying Fish]

And just about every Australian can afford a house,... Just not in a capital city,

Look at any of the major capital cities in the world,..... they have all become unaffordable at some stage,.... do you think the average family can afford a 1/4 acre block with a 4 bedroom house on it in londan, new york, tokyo or paris.

It is completely normal as cities grow that they will become unaffordable firstly to the low incomes then medium incomes and so on until they get to the stage that even rents are unaffordable and rent control legislation must come in.

What do you mean?

 

[numbercruncher]

What do you mean?

I think he means if your a Nurse, Teacher , Policeman , Truck Driver etc he beleives its normal that you cant afford a house in any of Australias capital cities*shrug*

I dont think its normal, or healthy .....

 

[Flying Fish]

I think he means if your a Nurse, Teacher , Policeman , Truck Driver etc he beleives its normal that you cant afford a house in any of Australias capital cities*shrug*

I dont think its normal, or healthy .....

So who can afford it?

 

[Tysonboss1]

What do you mean?

I mean it is a completely normal that houses prices in capital cities will increase to a levels where the average person can not afford to buy a home and is destined to be a life long renter,

This has happened in all the cities I listed in my post above,.... the reason is there is simply not enough land,...

yes there used to be a time when even a low income earner could buy a 1/4 acre block with a 4 bedroom house in the suburbs, but this days are over,... low income earner would probally stuggle to even rent a house like this in sydney, and that is normal.

Australian capital cities are getting to the size now where they are unaffordable and there is absouloutly nothing that can be done about it except reduce the population.

even if you halved interest rates,... returned all government land to develpers,.... developed the national parks,.... you would only delay the process by a few years.

If owning a family home is a big thing then people should move away from the capital cities.

 

[Flying Fish]

I mean it is a completely normal that houses prices in capital cities will increase to a levels where the average person can not afford to buy a home and is destined to be a life long renter,

This has happened in all the cities I listed in my post above,.... the reason is there is simply not enough land,...

yes there used to be a time when even a low income earner could buy a 1/4 acre block with a 4 bedroom house in the suburbs, but this days are over,... low income earner would probally stuggle to even rent a house like this in sydney, and that is normal.

Australian capital cities are getting to the size now where they are unaffordable and there is absouloutly nothing that can be done about it except reduce the population.

even if you halved interest rates,... returned all government land to develpers,.... developed the national parks,.... you would only delay the process by a few years.

If owning a family home is a big thing then people should move away from the capital cities.

Why would you want to live in a big city? they serve no purpose

 

[numbercruncher]

Why would you want to live in a big city? they serve no purpose

Shhhh dont let out the secret, last thing we need is the masses flooding out into the real world