More Australians face housing stress

Previously unreleased documents from the Reserve Bank show that a significant proportion of Australians are under serious financial stress because of their mortgage.

First-home buyers who indulged in the borrowing binge inspired by the Federal Government first-home owners' grant in 2008 are under the most strain.

A separate report shows that an inflated property market has left around one in 10 Australians facing poverty.

The early part of last decade saw the beginnings of a once-in-a-generation mining boom. Investors also were riding high on a share market that could do no wrong.

As a result, many Australians decided to take out a mortgage between 2004 and 2007, confident they were financially secure.

This fuelled a big jump in house prices, creating what some have described as a housing bubble.

Steve Keen, Associate Professor of economics and finance at the University of Western Sydney, says the jump in house prices created "one of the biggest housing bubbles on the planet".

Reserve Bank documents show that group of borrowers is now sinking in debt.

First-home buyers also are feeling the squeeze. Almost a quarter of first-home buyers in Melbourne, and 15 per cent of Sydney home owners, are now dealing with financial stress.

Those borrowers flooded into the market in 2009 when the first-home owners' grant doubled to $14,000.

"These people are going to be dragged into too much debt," Mr Keen said.

"At the top of the bubble they'll be the sacrificial lambs of a temporary recovery caused by restarting the housing bubble, and when it all comes down they'll be enemies of the people who brought the policy and got them into the debt in the first place."

Keeping pace

House prices in Australia have been growing steadily now for the past 15 years, but the income of everyday Australians has not kept up.

Figures from RP Data show the average Australian income is now between $55,000 and $60,000, but a typical house is worth around $450,000.

With the cost of living included, this means the median dwelling price is around 6.5 times disposable income for households, more than double what is considered affordable.

Principal research fellow at the National Centre for Social and Economic Modelling, Ben Phillips, says this has created stress for borrowers and renters alike.

"What we're seeing here, particularly for the renters, is that they are spending a lot of money on housing," Mr Phillips said.

"So it means that there's less money left over for all the other items they may be wish to spend their money on.

The problem is straight forward; there simply aren't enough houses and apartments being built to accommodate the expanding population, forcing prices higher, says Mr Phillips.

Incentives

It is not just simply a matter of building a new house; infrastructure and incentives for developers to create the necessary facilities also are required, says Macquarie Group senior economist Brian Redican.

"You really need the roads, the hospitals, the schools and the other transport infrastructure to be put in place," he said.

We also need to see an urgent pick-up in the willingness of developers to break more ground, but that might not be far off.

"Somewhere down the track we should see higher levels of housing construction," Mr Redican said.

"That will increase the supply of housing and should make it more affordable for more households."

More affordable, maybe, but there is still no mention of a major housing downturn.

"I think the most likely scenario is small house price declines, similar to what we've had in the last 12 months, so where prices are sort of probably down 3 to 5 per cent," Mr Redican said.

abc.net.au

Analysts forecast 5 per cent growth in property prices

AMID world economic gloom and on the eve of the biggest auction day so far this spring, several analysts are predicting 5 per cent price growth for Sydney property over the next year.

About 500 auctions are scheduled for today - the biggest line-up in four months but 27 per cent down on the same weekend last year.

''Buyers and sellers remain wary and with the seemingly constant flow of negative news from overseas economies, this is set to continue in the short term,'' the Australian Property Monitors economist Andrew Wilson said.

But longer term, speculation that interest rates will not rise until late next year has encouraged the analysts.

After a flat year, both APM and BIS Shrapnel are predicting 5 per cent growth in Sydney median house and apartment prices over the next year. BIS Shrapnel is going even further, tipping 6 per cent growth a year on average (but not each year) until 2014.

The managing director of BIS Shrapnel, Robert Mellor, said there could even be a flight to residential property as investors abandon the sharemarket.

''Over the next six months, no upward mobility in shares will encourage some investors to probably put some good money into residential,'' Mr Mellor said.

There are no analysts predicting a strong spring property market. However, some believe there could be a surge in demand for established properties priced up to $600,000, as first home buyers try to meet the year-end deadline for stamp duty concessions. From January 1, first timers will have to pay full stamp duty on all but new property.

Ariadni Papadopoulos, 38, is optimistic about today's auction of her one-bedroom 1970s apartment in Surry Hills. There are 15 contracts out, half of them to first home buyers.

''I think because of the area and the lack of apartments within that price range, I'm in a position that's quite unique,'' Ms Papadopoulos said.

Today's Spring Property Guide in Domain reports that Surry Hills apartments have had 16.5 per cent growth over the past year. Edgecliff, North Bondi and Glebe recorded 25 per cent growth.

For houses, the best performer was Newington, with 20.5 per cent growth in the median to $788,000. Four record sales in the million-dollar range have helped push up the median price over the year, but agents say prices have tapered off since March.

Many inner-west suburbs did well over the year for houses, including Strathfield South with 18.9 per cent growth and Summer Hill with 17.4 per cent.

East houses were a mixed bag. The expensive suburbs of Vaucluse and Bellevue Hill dropped 14.6 per cent and 13.2 per cent respectively. Woollahra went up 11.1 per cent but Paddington fell 6.6 per cent. Surry Hills rose 2.2 per cent.

In the north, Mosman's median price jumped 5.1 per cent over the year. ''That does surprise me a little bit,'' the director of Richardson & Wrench Mosman, Richard Simeon, said. ''But there is so much less stock on the market and properties are turning over.''

The top end continues to be a struggle, with properties selling for big discounts. Midweek auctions in the east - where some of the most salubrious addresses are on offer - have been a challenge for sellers and their agents.

At one group auction recently, just three sold of the nine that went under the hammer.

However, improving auction clearance rates of close to 60 per cent over the past couple of Saturdays have been an encouraging sign for sellers.

SMH