Australian Politics Forum - Booming House Prices May Spark A Mortgage Crisis.

imcrookonit

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Booming House Prices May Spark A Mortgage Crisis.
Mar 10^th, 2011 at 5:00pm

BOOMING house prices could trigger a mortgage crisis in Australia, a property researcher says. Sad

The nation could face a sub-prime crisis like the one in the US that sparked the global financial crisis, said Brian Haratsis, chief economist at Macro Plan Australia.

He warned that without government intervention on house prices battlers at the bottom end of the market would be worst affected. Sad

He is also predicting at least two rate rises this year, pushing home loan interest rates as high as eight per cent for some punters and freezing the market.

"Australia is going to be extremely exposed between 2012-15 because people won't be able to afford to buy a house," he said. Sad

"A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands."

He warns that all parts of the property market could feel the effects if another "Black Swan Event" like a market crash in China occurs.

Mr Haratsis has been monitoring the industry for 30 years and believes house prices are inflated by about 20 per cent at the moment. Sad

He will be speaking at the first ever Australian Mortgage Conference in Sydney today, which will discuss this and other issues facing the lending market in the coming decade.

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hawil

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #1 - Mar 10^th, 2011 at 5:05pm

That is Capitalism for you, when people may have to sell under stress, then the vultures will buy very cheap.
Yet there are still people under the misapprehension that house prices always go up; yet on the Gold Coast there is a five year supply of units and the number on the market is almost four times the normal.

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Lisa Jones

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #2 - Mar 10^th, 2011 at 5:36pm

Damn .. I would have loved to have been at that conference today.

Brian Haratsis does know what he's talking about. He is a professional speaker with a hell of a lot of relevant experience.

Having said that .. I'm not sure if he has all the answers though (hence why I would have loved to have been at that conference today .. coz I would have thrown a few tricky questions at him lol).

Hmm might see if I can find out where he's talking next.

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If I let myself be bought then I am no longer free.

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Lisa Jones

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #3 - Mar 10^th, 2011 at 6:02pm

1) He warned that without government intervention on house prices battlers at the bottom end of the market would be worst affected.

2) He is also predicting at least two rate rises this year, pushing home loan interest rates as high as eight per cent for some punters and freezing the market.

3) "Australia is going to be extremely exposed between 2012-15 because people won't be able to afford to buy a house," he said.

4) "A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands."

- From the OP

Re 1) What sort of govt intervention is he referring to? I'm sure he isn't referring to an increase in the 1st home owners grant (given that's been tried before and it failed miserably).

Re 2) I doubt this will "freeze" the market ... it will slow it down though.

Re 3) I agree. Why? People are already paying ridiculous amounts of $$$ for an average sized home in an average suburb here in Sydney. $1 mill doesn't get you much anymore .. and couples are working hard to pay off mortgages around $1 mill. That's a BIG ask IMO.

Re 4) Yes I agree IFF (if and only if) there is a dramatic correction in the property market. I don't think it's going to happen esp if interest rates are going to go up to 8 % as he's predicted. I think we'll see a correction but nothing too dramatic. Even then .. those who are NOT over committed and have bought POSITION .. will be able to ride the correction wave. Those who haven't .. will experience a submarine mortgage situation .. and learn from it. That's always been the case though .. nothing new there.

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If I let myself be bought then I am no longer free.

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Sir lastnail

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #4 - Mar 10^th, 2011 at 6:58pm

Lisa Jones wrote on Mar 10^th, 2011 at 6:02pm:

1) He warned that without government intervention on house prices battlers at the bottom end of the market would be worst affected.

2) He is also predicting at least two rate rises this year, pushing home loan interest rates as high as eight per cent for some punters and freezing the market.

3) "Australia is going to be extremely exposed between 2012-15 because people won't be able to afford to buy a house," he said.

4) "A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands."

- From the OP

Re 1) What sort of govt intervention is he referring to? I'm sure he isn't referring to an increase in the 1st home owners grant (given that's been tried before and it failed miserably).

Re 2) I doubt this will "freeze" the market ... it will slow it down though.

Re 3) I agree. Why? People are already paying ridiculous amounts of $$$ for an average sized home in an average suburb here in Sydney. $1 mill doesn't get you much anymore .. and couples are working hard to pay off mortgages around $1 mill. That's a BIG ask IMO.

Re 4) Yes I agree IFF (if and only if) there is a dramatic correction in the property market. I don't think it's going to happen esp if interest rates are going to go up to 8 % as he's predicted. I think we'll see a correction but nothing too dramatic. Even then .. those who are NOT over committed and have bought POSITION .. will be able to ride the correction wave. Those who haven't .. will experience a submarine mortgage situation .. and learn from it. That's always been the case though .. nothing new there.

The spruikers will jump at anything to put a floor under house prices. What annoys me is how they want to do it under the guise of helping out the battlers which is a total lie Sad

They peddle the battler doing it tough line to the government and the government falls for it hook line and sinker everytime. If they really want to help out the battlers then let it crash so that the price drops and the battlers can afford to buy a place Wink

That's how you help out the battlers Wink

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Dsmithy70

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #5 - Mar 10^th, 2011 at 7:24pm

Quote:

They peddle the battler doing it tough line to the government and the government falls for it hook line and sinker everytime.

Unfortunately their right in this instance.
As I showed in the other thread the top end of the market has not suffered as the middle bottom end, yes prices have been relatively stable and not climbing but they aren't going backwards.
The lower end of the market is where its going to bite, those that have bought in the last 5 years outside a captial city will see their investment go backwards as the correction comes in.
Then again I'm ones of those vultures just waiting

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qikvtec

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #6 - Mar 10^th, 2011 at 8:09pm

Dsmithy70 wrote on Mar 10^th, 2011 at 7:24pm:

Quote:

They peddle the battler doing it tough line to the government and the government falls for it hook line and sinker everytime.

Unfortunately their right in this instance.
As I showed in the other thread the top end of the market has not suffered as the middle bottom end, yes prices have been relatively stable and not climbing but they aren't going backwards.
The lower end of the market is where its going to bite, those that have bought in the last 5 years outside a captial city will see their investment go backwards as the correction comes in.
Then again I'm ones of those vultures just waiting

Smithy perhaps I've misunderstood this, and certainly not review your posts in the other thread, but, locally at least, the top end of the market has been hit the hardest, with little or no change in the bottom end, and nothing to be overly concerned about in the middle.

Not that it matters anyway if you aren't forced to sell.

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Lisa Jones

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #7 - Mar 10^th, 2011 at 8:10pm

If they really want to help out the battlers then let it crash so that the price drops and the battlers can afford to buy a place. That's how you help out the battlers

- Last Nail

NO NO NO!

If they let it CRASH .. it is the battler who will suffer most (NB battler = those with little equity and who have bought in at the lower end of the market.)

Everyone will hurt .. but the BATTLER will hurt the most.

In fact .. they will be the 1st to go through mortgagee sale pain. It's happened before Last Nail.

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If I let myself be bought then I am no longer free.

HYPATIA - Greek philosopher, mathematician and astronomer (370 - 415)

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qikvtec

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #8 - Mar 10^th, 2011 at 8:11pm

Lisa Jones wrote on Mar 10^th, 2011 at 6:02pm:

1) He warned that without government intervention on house prices battlers at the bottom end of the market would be worst affected.

2) He is also predicting at least two rate rises this year, pushing home loan interest rates as high as eight per cent for some punters and freezing the market.

3) "Australia is going to be extremely exposed between 2012-15 because people won't be able to afford to buy a house," he said.

4) "A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands."

- From the OP

Re 1) What sort of govt intervention is he referring to? I'm sure he isn't referring to an increase in the 1st home owners grant (given that's been tried before and it failed miserably).

Re 2) I doubt this will "freeze" the market ... it will slow it down though.

Re 3) I agree. Why? People are already paying ridiculous amounts of $$$ for an average sized home in an average suburb here in Sydney. $1 mill doesn't get you much anymore .. and couples are working hard to pay off mortgages around $1 mill. That's a BIG ask IMO.

Re 4) Yes I agree IFF (if and only if) there is a dramatic correction in the property market. I don't think it's going to happen esp if interest rates are going to go up to 8 % as he's predicted. I think we'll see a correction but nothing too dramatic. Even then .. those who are NOT over committed and have bought POSITION .. will be able to ride the correction wave. Those who haven't .. will experience a submarine mortgage situation .. and learn from it. That's always been the case though .. nothing new there.

No one is forced into a million dollar property or mortgage; if you're battling to meet a million dollar mortgage sell and downgrade or wear it, it's their choice. A lot of people spend a lot of money they don't have trying to buy things they don't need to impress people they don't even know or like.

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Politicians and Nappies need to be changed often and for the same reason.

One trouble with political jokes is that they often get elected.

Alan Joyce for PM

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Sir lastnail

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #9 - Mar 10^th, 2011 at 8:14pm

Dsmithy70 wrote on Mar 10^th, 2011 at 7:24pm:

Quote:

They peddle the battler doing it tough line to the government and the government falls for it hook line and sinker everytime.

Unfortunately their right in this instance.
As I showed in the other thread the top end of the market has not suffered as the middle bottom end, yes prices have been relatively stable and not climbing but they aren't going backwards.
The lower end of the market is where its going to bite, those that have bought in the last 5 years outside a captial city will see their investment go backwards as the correction comes in.
Then again I'm ones of those vultures just waiting

that's right house prices only go up or plateau but they never go down !! Yeh right Wink

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Lisa Jones Gold Member Offline Australian Politics Posts: 39047 Sydney Gender:	Re: Booming House Prices May Spark A Mortgage Crisis. Reply #10 - Mar 10^th, 2011 at 8:16pm Qikvtec .. did you miss the point I was making .. about how $1 mill in Sydney gets you nothing much now?
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Sir lastnail

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #11 - Mar 10^th, 2011 at 8:19pm

Lisa Jones wrote on Mar 10^th, 2011 at 8:10pm:

If they really want to help out the battlers then let it crash so that the price drops and the battlers can afford to buy a place. That's how you help out the battlers

- Last Nail

NO NO NO!

If they let it CRASH .. it is the battler who will suffer most (NB battler = those with little equity and who have bought in at the lower end of the market.)

Everyone will hurt .. but the BATTLER will hurt the most.

In fact .. they will be the 1st to go through mortgagee sale pain. It's happened before Last Nail.

i don't think so Lisa. It's the people at the top end of town who have over committed and bitten off more they can chew will suffer the most.

and why not use tax payers money to put a floor under the share market to stop it from collapsing ?? Plenty of mums and dads investors involved in that not to mention super funds etc. Ever heard of a first share buyers grant ??

LOL It's totally absurd to keep using tax payers money to distort the free market system !!

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"If you take out Saddam, I guarantee you that it will have enormous positive reverberations on the region..." - Benjamin Netanyahu in 1995

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Sir lastnail Gold Member Offline Australian Politics Posts: 30900 Gender:	Re: Booming House Prices May Spark A Mortgage Crisis. Reply #12 - Mar 10^th, 2011 at 8:20pm Lisa Jones wrote on Mar 10^th, 2011 at 8:16pm: Qikvtec .. did you miss the point I was making .. about how $1 mill in Sydney gets you nothing much now? that's because it is way over priced and due for a major correction
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longweekend58

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Re: Booming House Prices May Spark A Mortgage Crisis.
Reply #13 - Mar 10^th, 2011 at 8:20pm

Lisa Jones wrote on Mar 10^th, 2011 at 8:10pm:

If they really want to help out the battlers then let it crash so that the price drops and the battlers can afford to buy a place. That's how you help out the battlers

- Last Nail

NO NO NO!

If they let it CRASH .. it is the battler who will suffer most (NB battler = those with little equity and who have bought in at the lower end of the market.)

Everyone will hurt .. but the BATTLER will hurt the most.

In fact .. they will be the 1st to go through mortgagee sale pain. It's happened before Last Nail.

toenail doesnt care about battlers or anyone actually. he wants house prices to crash for reasons that only his therapist would understand. house price crashes would devastate the economy as so much is underpinned on it. A 10% correction would be no big deal and somethign that has happened many times in the past. evena 20% correction wuld worry very few because assumming you can afford your mortgage, the actual value of your house is pretty irrelveant. and if you sell then the house you move to has also been reduced by 20%. The only people who would really lose are those who are forced to sell who will lose 20% of their value and possibly end up with negative equity.

Personally, I expect no more than a 10% correction on average and many places to have far less (or zero) and a few - like western sydney - to have more.

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qikvtec Gold Member Offline Australian Politics Posts: 1846 Queensland	Re: Booming House Prices May Spark A Mortgage Crisis. Reply #14 - Mar 10^th, 2011 at 8:22pm Lisa Jones wrote on Mar 10^th, 2011 at 8:16pm: Qikvtec .. did you miss the point I was making .. about how $1 mill in Sydney gets you nothing much now? Did you miss mine? If you can't afford it you can't afford it. Sell it and move.
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