Disaster in the Aussie Housing Market
I have mentioned the housing situation in
Germany before now. I've also mentioned Australia. The two
are opposites. Germany's real estate market has been doing
nicely while Aussie's has been dropping through the floor.
The problem has been not only that real estate prices have been falling for the past few years, but that the banks have been running a mega fiddle on mortgage applications.
This worked well when prices were rising as nobody could lose, but once prices reverse, all hell breaks loose.
There is one other joker in the pack. Following a court ruling, banks cant foreclose on a property where it can be proved they fiddled the books, so not only do they have a non performing mortgage on their hands, but they have no collateral to call on either. That makes these foreclosures serious for the banks. They aren't just taking a small loss in such a situation, but a major loss. This is hitting the banks' bottom line rather hard.
It is still not known how common the market manipulation was, but with over 6% of mortgage holders unable to meet payments, the situation is serious.
House prices stopped rising a few years ago. In two capital cities they’re down 40%. This means the whole market is teetering into collapse mode.
Here is what is being said about the forthcoming cases brought by the regulator against one of the banks.
Meanwhile, hundreds of thousands of Australians could join class actions against the banks. One is already underway. The precedent now allows them to cancel their loan and keep their home.
Naturally there is a knock-on effect. Who is going to buy into the market while prices are falling, and likely to crash much further? Construction has declined for the last four consecutive quarters. Developers are going bust.
Aussie households are already struggling too. Here's the chart:
Over the past five years Aussie incomes have contracted.
There is one other statistic which is worrying.
Mortgage debt for older Australians has increased to more than $185,000 from $27,000. That’s an increase of a massive 600 per cent between 1987 and 2015 for people aged over 55.
Research from the Australian Housing and Urban Research Institute revealed the group’s average mortgage debt to income ratios tripled from 71 to 211 per cent over the same period.
The news can be summed up for investors very simply. Don't touch Aussie housing with the proverbial barge pole.
Apparently various bankers are trying to sell on their toxic loans by packaging them up into company stock to be floated on the stock exchange.
Don't under any circumstances touch any of this stock when it goes live, probably early next year.
Anything else look bad?
Oh yes, the Aussie dollar is still falling. Presumably it still has some way to go.
At the moment it looks as though Australia has turned into the Unlucky Country.
The problem has been not only that real estate prices have been falling for the past few years, but that the banks have been running a mega fiddle on mortgage applications.
This worked well when prices were rising as nobody could lose, but once prices reverse, all hell breaks loose.
There is one other joker in the pack. Following a court ruling, banks cant foreclose on a property where it can be proved they fiddled the books, so not only do they have a non performing mortgage on their hands, but they have no collateral to call on either. That makes these foreclosures serious for the banks. They aren't just taking a small loss in such a situation, but a major loss. This is hitting the banks' bottom line rather hard.
It is still not known how common the market manipulation was, but with over 6% of mortgage holders unable to meet payments, the situation is serious.
House prices stopped rising a few years ago. In two capital cities they’re down 40%. This means the whole market is teetering into collapse mode.
Here is what is being said about the forthcoming cases brought by the regulator against one of the banks.
"National Australia Bank will face claims it used hairdressers and gym instructors to illegally reel in borrowers who could not afford to repay loans when it becomes the first bank to be taken to court by the corporate regulator in the wake of the Hayne royal commission.This is just the beginning. A further 50 court cases are in the works according to the regulator.
NAB's introducer program was savaged at the Hayne royal commission when it was revealed bank employees were accepting brown paper bags of cash over the counter."
Meanwhile, hundreds of thousands of Australians could join class actions against the banks. One is already underway. The precedent now allows them to cancel their loan and keep their home.
Naturally there is a knock-on effect. Who is going to buy into the market while prices are falling, and likely to crash much further? Construction has declined for the last four consecutive quarters. Developers are going bust.
Aussie households are already struggling too. Here's the chart:
Over the past five years Aussie incomes have contracted.
There is one other statistic which is worrying.
Mortgage debt for older Australians has increased to more than $185,000 from $27,000. That’s an increase of a massive 600 per cent between 1987 and 2015 for people aged over 55.
Research from the Australian Housing and Urban Research Institute revealed the group’s average mortgage debt to income ratios tripled from 71 to 211 per cent over the same period.
The news can be summed up for investors very simply. Don't touch Aussie housing with the proverbial barge pole.
Apparently various bankers are trying to sell on their toxic loans by packaging them up into company stock to be floated on the stock exchange.
Don't under any circumstances touch any of this stock when it goes live, probably early next year.
Anything else look bad?
Oh yes, the Aussie dollar is still falling. Presumably it still has some way to go.
At the moment it looks as though Australia has turned into the Unlucky Country.
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