The National Australia Bank (NAB) chief executive warned the Australian government's banking inquiry this week of an Australian apartment glut. NAB’s chief executive, Andrew Thorburn also re-enforced the banks strict lending policy for off the plan apartments that is restricting foreign property investors from obtaining finance. When will the Australian property bubble burst ? In addition to the Australian 230,000 apartment glut and oversupply, another survey by Roy Morgan Research revealed that approximately 311,000 indebted Australians had no equity in their properties (negative home loan equity), with many owing more to the bank than their homes are worth, adding further fuel to the Australian housing bubble risk. "With over 300,000 home borrowers having no real equity in their homes, this represents a considerable risk, particularly if home values fall or households are hit by unemployment," Roy Morgan's director of industry communications, Norman Morris, said.
National Australia Bank has highlighted the risk of an apartment glut in parts of inner Sydney and Melbourne, as a separate survey suggested hundreds of thousands of indebted Australians had no equity in their properties. Under questioning about the risks of a housing bubble at the government's banking inquiry, NAB chief executive Andrew Thorburn pointed to a tougher stance being taken by the bank in lending for new apartments, amid a surge in apartment construction. While he denied property was overpriced, Mr Thorburn signalled the bank remained wary towards the apartment market in some inner-city areas, where it is requiring borrowers stump up a 40 per cent deposit. The comments came as Roy Morgan Research on Thursday said 311,000 homeowners nationally had no equity in their properties, with mining states the most exposed.
As many as 311,000 Australian mortgage holders - 6.8 per cent of the country's total - have negative or little equity in their homes, the latest figures from Roy Morgan Research show. That's an improvement on four years ago, when there were 333,000 people (7.7 per cent of the total) with home values worth less than or only equal to the amount they owed. The overall improvement reflects the rise in dwelling values that has given owners greater equity, as well as lower interest rates that mean mortgage holders pay less to service their loans. However, it masks the regional disparities that mean east coast mortgage holders are better off while those in the west are worse off. While the proportion of mortgage owners with little or no equity in NSW shrank to 5.1 per cent this year from 7.6 per cent in 2012, it widened in Western Australia to 9.2 per cent from 8.1 per cent.
Australian underemployment triggers mortgage stress in a third of Australian households with home loans serviced by dual-incomes, new research has revealed. The Australian mortgage belt is heavily reliant on two incomes to meet bank loan repayments. With the highest household debt in history, a third of owner occupier home loans could face mortgage stress if one of the borrowers becomes unemployed or is forced into underemployment. Australian underemployment has reach a historically high of 8.7 per cent and has triggered an increase in the number home owners unable to meet their home loan repayments, according to the global credit rating agency Fitch Ratings. Dual-income households has now been identified as an Australian banking risk should repayments rise or employment conditions sour further based on their ability to service repayments.
The Australian level of household debt dwarfs that of the USA at the peak of the GFC housing bubble. Published in the Guardian, the following snippets paint a devastating prophecy of the Australia economy. Today, the Australian household sector is the most leveraged in the world, with debts equal to 125% of GDP as of the first three months of 2016 (and its rising even further). In contrast, US household debt peaked at 98% in the first quarter of 2008. The US government was obliged to bail out its over leveraged banking system and mortgage lenders that were too heavily geared towards profiting from mortgage debt.
AUSTRALIA has roughly “six weeks” to prevent a housing market collapse caused by the banks’ crackdown on foreign investor lending, a US defence think tank has warned. In an article titled “Australia Risks Strategic Setback From a Significant Foreign Direct Investment Drop Due to Changes in Bank Policies”, the Washington-based International Strategic Studies Association warns that Australia “may be entering a significant phase of its economic-strategic development”. It argues “changes in local banking policies” could see foreign direct investment in the property sector “decline markedly”. “This will profoundly impact the Australian government’s ability to fund major programs in the defence and civil sectors,” it said.