Australian Real Estate

Submitted by Marco on 3 February, 2008 - 16:20

Australian Real Estate

Here's an update on Australian real estate. The "Australian Mortgage Industry Report", a joint research whitepaper by JPMorgan and Fujitsu Consulting, due to be published next month, makes the prediction that some 750,000 Australian homeowners will be subjected to "mortgage stress" in the coming months - which means more than 35 per cent of their income will be allocated to home-loan repayments alone.

Real Estate Mortgage Woes

Within the group of 750,000, about 250,000 to 300,000 are predicted to suffer from "severe mortgage stress", where they begin defaulting and risk having their homes repossessed. The prediction of severe mortgage stress has more than doubled since the last Australian Mortgage Industry Report JPMorgan-Fujitsu report last September, which estimated about 113,000 homeowners were at risk. The number of repossession writs issued by the NSW Supreme Court has already risen by 67 per cent over the last two years, with 3935 orders issued in 2007.

...some 750,000 Australian homeowners will be subjected to"mortgage stress"...

"Our own research shows that about 40 per cent of mortgage holders have said that if there's a 50 basis points increase they will find servicing their mortgage much harder," Phil Naylor, chief executive officer of the Mortgage Industry Association told Sky News. "The percentage of defaults across Australia is 0.2 per cent, that's a very small number," he said. "Even if it doubles it only goes to 0.4, if it triples it only goes to 0.6, it's still a very small number."

Australian Real Estate: Prime Minister Response

"The pressures on working families arising from mortgage pressure, arising from other cost of living pressures, are acute," said Australian Prime Minister Kevin Rudd. "I am deeply aware of that." "Our concern, front and centre, is to fight the fight against inflation because we must do that in order to do our part to take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."

The Reserve Bank of Australia (RBA) is scheduled to meet this Tuesday (5th February 2008) to consider a possible rate rise. Financial analysts predict a 25 basis point (0.25%) increase.

Rental Real Estate

This cycle of repossession from defaulting homeowners are impacting the already saturated rental market. As interest rates creep higher and higher real estate prices become the norm, first time home buyers are being restricted from entering the property market and also find themselves on the jam-packed road to finding a rental property.

As a result of the competitive rental real estate market, rents are increasing by up to 10 per cent. Meaning, increasing rental yields for rental property investors. Generation Y's are looking to move out of home - who cannot afford to purchase real estate are finding themselves looking at renting inner city properties. Increased demand, means increased price and therefore increased yield for the investor.

Monopoly Board Real Estate

Two Australian cities are vying for a spot on the global edition of the monopoly board. The poll includes a preselected list of 68 cities, or which 20 will obtain the valuable real estate. Currently, Sydney is at fifth behind Paris, London, Montreal and New York while Melbourne is at 31st position. You can vote on their website.

Here's an update: the

Here's an update: the outcome of the Interest Rate decision will be released this afternoon at 2.30pm Sydney time. It's the first time that the RBA is releasing the Outcome of their board meeting on the same day of the RBA board meeting. If they raise it - interest rates will be at an 11 year high.

Also there has been a lot of political talk from Prime Minister Kevin Rudd trying to initiate fiscal policy (the federal budget) measures to control the economic overheating and ease inflation pressure along side monetary policy (interest rates from the RBA). "Our predecessors were projecting a budget surplus for 08-09 of about 1.0 (to) 1.1 per cent of GDP." said Rudd "We've said we can do a lot better than that. We're ... aiming for 1.5."

On Monday, Ross Gittins, the Sydney Morning Herald Columnist, he noted in his column that:

My guess is that, to produce a change capable of being taken seriously by the Reserve, Mr Swan will need to budget for a surplus of at least 2.3 per cent. That is, one expected to be at least $10 billion higher than last year's."