Average mortgage rates and percentage of IP ownership

With all the talk about property prices falling, i thought i'd collate a few numbers together:

Average mortgage rate:
NSW - $456K
VIC- $396K
TAS - $242K

Percentage of IPs owned by investors:
1,494,837 Tax returns with investors owning IPs:
71% of the total amount of property investors owns 1 IP
18.9% of all property investors own 2 IPs
1% have 3 IPs
2.1% have 4 IPs
0.13% have 5 IPs
0.14% with 6 or more IP's

The above numbers don't seem to give the idea that there will be a property fire sale anytime soon considering the economy and rates stay around the current situation. And even if that was the case, the amount of investors that might have to sell and the amount of properties that would be up for sale doesn't seem to be too bad.

What do you guys think?

I used the below articles for references
Mortgage Brokers helping you with your first home, next home, investment property or refinance
What's the Average Australian Home Loan Size?

 

I like this. But it is talking about the supply side. No fire sale because the numbers in trouble are too small.
But on the demand side...doesn’t this mean a lot less investors, and so less demand? Especially in investor areas?

 

you cant really tell. from the numbers 90% own 1 or 2 IPs. However we do not know how many are "rentvestors" who may have highly leveraged IPs. You cant really stratify who are those who may be forced to sell when they cant renew their IO loans. A better idea may be to look at numbers for IP loans made out by the banks.

This report in September... Looks like credit has expanded from OO loans but investor is falling. Total housing finance is up though so doesnt look like a crash yet.

The value of investor loans in Australia just fell to a 5-year low
[The value and number of owner-occupier home loans increased modestly in July, leading to a modest increase in the total value of housing finance.

The value of investor lending continued to fall, reflecting both tighter lending standards and recent declines in home prices in Sydney and Melbourne, previously favorite markets for investors.]

 

Past housing corrections didn't see real estate tank. I highly doubt this one will. Same old same old. Different time, new cycle.

 

Australia wide may be not,
but house prices falling 20% from its peak by by 2020 in Syd/Melb, is it really unthinkable given the headwinds?

 

Not unthinkable and very likely in some areas for some stock. But still no widespread crash on the cards (situation can change but i'm talking as of today) imo, which is what many out there are predicting playing on most peoples fears. A lot of sensationalist media reporting. But its nothing new.

 

and yet Sydney houses have already fallen close to 10% within a year, if everything is hunky dory why so much so fast?

We have close to 480bn IO expiry due by 2021, 120bn each year,

based on average loan figure(of NSW: 456k) thats a big number of IO loans alone set to expire till 2021, even if 10% of these IO2PI rollovers are forced to sell on top existing 30% less buying power, prices in Sydney/Melbourne can further take a meaningful hit even if they have already fallen.

 

Is that a crash?

 

Lets talk in percentage rather then use terms like Crash or correction as there terms are open to convenient interpretations.

Fear Mongers are not new they always existed, markets don't fall based on dooms-sayers wishes especially given that Property is ingrained deep within Australian mindset.

This time there are simply so many headwinds (both micro and macro) piled against it thats its hard to think of any reason for a bottom here or even in 12 months time (in Syd/Melb).

 

call it a small blip if you like, whats in the term

and thats why using percentage as against terms is less confusing.

 

The article refers to "home loans" but your discussion is referring to " investment property".
Investment property would include commercial property but home loans would only refer to houses.
Also the tax returns would be individual's ownership not companies and trust.
I would be keen to see what percentage own more than a 100 and/or have taxable income in excess of $2m.

 

Syd and Melb have thousands of markets. I am sure some will see a bottom later in time. Others sooner. And others will be neutral more or less. I don't believe all markets and stock types are affected equally.

 

Average is deceptive. The average of 1 million is zero is 500k. And one person clearly will have a problem and the other clearly not. Let’s wait and see

 

Would be interesting to see median figures rather than average

 

Even median is less useful. You really need a bell curve and see how much concentration at the tail end is. It’s the marginal seller that sets the price.

 

As in if you have a large number of people who are close to paying it off and a large number who are 10 x income leveraged. Your median will be fine. But you still have a problem

 

Couple it with some more facts -

• Firstly, two out of three Australians own their own home or are living in a home with the owner and one in three are in a rented place. Of the 66% who own their home, half of these homes are fully paid off with no loan whatsoever.

• Next, let’s look at the generational change occurring, where many Baby Boomers (aged 60 to 75 approximately) are assisting their children secure a first home and of course as the life cycle turns, many will also be leaving their often considerable assets to their kids.

• We are enjoying a robust economy, low levels of unemployment, record low interest rates and significant overseas immigration and investment. None of these are likely to change significantly into the future. After all, we are the lucky country.

• On top of this, our country has a unique population concentration. This concentration, coupled with a chronic undersupply of housing, particularly in Sydney and Melbourne, keeps a rock-solid platform under home values.

• APRA can help ease regulations to stabilise the falling market (if we start seeing rapid falls).

• RBA still has room to move with cash rate currently at 1.5%. Most of the economist are predicting next move upwards sometime mid to late next year but if tsunami was to hit our shores, we will see RBA dropping the rates.

Only time we will see crazy drop of 35%-40% (predicted by Steve Keen and Harry Dent) is if financial catastrophe engulfs the entire world...

Happy investing!!..

FinanceBoutique blog -
Fundamentals That Keep OZ Property Foundation Strong..

Cheers,

 

Lol, every time I hear the word unique, I get worried. A few points
- not sure whether it is still true that 1/3 owns that properties
- we have a big underemployment problem, which is contributing to lower wage growth.