"The Crash" has been called... end of 2017.

• Mortgage Stress Calculator
• "Mortgage stress is defined as a situation in which homebuyers are paying more than 30 per cent of their disposable income on home loan repayments. Source: National Centre for Social and Economic Modelling, University of Canberra."

 

True, but i think you may be framing this issue in isolation. There are a multitude of flow on effects to the economy:

http://www.smh.com.au/video/video-business/video-businessday/are-our-household-debt-levels-a-worry-20170208-4qaux.html

 

It’s probably time to rethink the definition of mortgage stress. >30% = stress just doesn’t work, its too simple.

If you’re making 10k a month and your mortgage repayment is 3k you’re not in mortgage stress even though the rule states you are. You could be paying double that and still have 4k a month to live on.

If you’re making 3k a month and your mortgage is 900 then I think yes the rule applies.

 

Yes, sure it's a rough rule of thumb not a key economic indicator. There are certainly outlying examples on both ends of the spectrum as you have given. But if we take the median i think it is still a valid guide.

 

Exactly, and what other numbers show is that it's not necessarily average 2 income home owner family that are borrowing to buy.

Investors now make up a higher percentage of loans. The impact to an investor isn't going to be as great as a home owner because negative gearing will absorb some of it and there are potentially other levers they can pull to lessen the impact (e.g. increase rents).

Then there is a thread on here about the increase in investors with more than 5 properties, so it could be that the type of investors in the market today may have moved to the type that can afford it more e.g. ones that are cashed up from the capital gains on their (now possibly positively geared) other properties.

 

Definitely agree, imo lengthy stagnation very likely. If prices remain at current levels, it will take a huge jump in wage growth to rebalance the P/E and take risk out of the market.

 

If a crash/softening is based upon interest rate rises the rises need to be initiated by data. Whilst the FHB market is going crazy due to no stamp duty, the new mortgage numbers are still gonna keep getting pushed along. I dont think reserve bank breaks it down to individual markets, similar to the problem Oz always has with 2 speed economy. The stamp duty incentive was supposed to get FHB into the market but what Ive seen at auctions in the past month is double the buyers pushing the prices further up.

 

Looking at mortgage defaults in Perth investors are actually more likely to default than owner occupiers. This has actually been the case for many years. Investors more likely to default

Tenants lose their jobs and can’t pay the rent it makes it harder to make repayments especially when many landlords are even paying off a PPOR mortgage themselves or renting elsewhere.

 

I think the only way property prices would crash is if we reduce our immigration rate significantly. For quite a while, we haven't built enough dwellings in Sydney to match population growth.

I still think any house in Sydney in a blue chip suburb which meets council requirements to build a dual occupancy will always be in demand as well as any house that is zoned R3 etc.

 

So true. My rent is 35% of my after tax income and I eat smashed avo every weekend with my family. I also invest significantly. I do have other lumpy income from investing but that just goes back into investing so it doesn't effect the lifestyle.

 

'The Crash', whatever that infers, has now been postponed for another 9 years...until 2026.

 

Aahhh....the advantages of a crystal ball.

 

This is exactly what I've been thinking about. If rates double or triple you will final see a correction in housing prices across the country. There is no denying that. Anyone highly geared with rates doubling / tripling has to have good cash flow to fund this plus paying their land tax (where multiple IP's are held). This is when investors start to sell.

With Trump in the Whitehouse one cannot discount global financial issues. If he instigates problems with N Korea there could be global ramifications.

 

Interest rates doubling will kill property. So how likely is it to happen? How might it happen? how long have you been fearing rates doubling and what opportunities have you missed out on by being wrong?

If a nuke hits you youre dead. Have you built a bunker yet?

 

No chance of IR rates doubling...that would be catastrophic for the economy.

However...I can see interest rates in the low to mid 6s at some point.

Coming from sub 4%...to 6.5% is a massive jump already that is like 60-65% increase. Already some investors are paying 5.2% which is already a 30-35% increase....I personally feel 50 basis points will floor Sydney/Melbourne...Qld,Tas, WA, SA should be ok as house prices there are not as insane albeit wages being 10-30% lower there.

 

Working on it..