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The dire warning to those over 35 on home ownership

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IF YOU aren’t on the property ladder by 35 then you could be paying off your mortage with your superannuation, a property expert has warned.
The stark statement comes as figures show the wealth gap between generations is widening with home ownership among young Australians falling to the lowest level on record.

Startling Grattan Institute statistics show wealthy people aged 55-64 are the only group which has seen its home ownership rates increase over 30 years.

The biggest falls in ownership have been suffered by the young people aged 25-34, who saw their home ownership rate drop by more than 30 per cent from 1981 until 2011. Only 45 per cent of them own their own homes.

This is down 16 per cent from the 1980s, with almost half the decline coming in the past decade.

Only the richest Australians aged 55-64 have seen their home ownership levels increase. Picture: Grattan Institute.Source:Supplied

Only the richest Australians aged 55-64 have seen their home ownership levels increase. Picture: Grattan Institute.Source:Supplied

And, if the government doesn’t do something to help younger people own homes, there will be “stark differences” between the “haves and have-nots” in the near future, warns a leading housing policy expert.

The alarming findings come after Sydney held its title as the second-costliest housing market in the world, in this year’s Demographia International Housing Affordability Survey.

Research by Finder.com.au shows that even Sydney’s ‘bargain’ suburbs that were $500,000 or cheaper in 2012 have nearly doubled in value in the past five years.

While Melbourne, ranked the world’s most liveable city the past seven years by the Economist Intelligence Unit, is now the planet’s sixth-most expensive place to buy a house.

Brendan Coates, a housing policy expert at the Grattan Institute, said the issue of young people being locked out of the property ladder is one which will take at least two decades to fix.

“Reforming negative gearing and capital gains tax, which have added fuel to the fire, would be a good start but it would only lower prices by about two per cent.

“It’s not about how many homes we build this year or next year. We would need to see at least a decade of sustained home building to make a big difference.

“If Australians are not on the property ladder by the time they are 35, then it is unlikely that they will own their home outright,” he said.

“This means that more and more people will start to use their superannuation to pay off their debts. This is worrying because, over time, the differences between the haves and have-nots will be stark.”

He added soaring property prices are a major factor behind the rapidly growing wealth of older Australians.

‘More money going on servicing a mortgage means there is less to spend elsewhere, dragging on economic growth,’ says economist Paul Dales. Picture: Grattan Institute

‘More money going on servicing a mortgage means there is less to spend elsewhere, dragging on economic growth,’ says economist Paul Dales. Picture: Grattan Institute

“Households headed by 65-74-year-olds were on average $500,000 wealthier in 2015-16 than households in the same age group 12 years ago,” he added.

According to the ABS, house prices grew by 37 per cent on average across all the capital cities between 2003-04 and 2015-16 and by more than 50 per cent in Melbourne alone.

However, Paul Dales, chief Australian economist at Capital Economics said the age gap in home ownership is not all bad news for the Aussie economy.

“There are a lot of social issues which come out of young people not being able to afford their own homes, but for the economy – there’s not one clear answer to say whether it’s good or bad.

“One one hand, young people are spending so much of their income on mortgage repayments or on rent that they have far less money on other things.

“More money going on servicing a mortgage means there is less to spend elsewhere, dragging on economic growth.
“But, there are some offsets to this. The older homeowners have seen their family homes have soared in value and, as a result, they have more wealth to spend on other things.

“We also see a lot of young people living with their parents so they can save for a deposit for a home, and they are put off by renting because it is so expensive.

“This means their income is not being swallowed up by rent, so this can also have a positive effect on the economy.”

Some of the falls in home ownership are also partly the result of social changes Australians are waiting until later in
life before starting work, forming long-term partnerships, and having children, Mr Coates said.

“But most Australians still want to own a home, so it is reasonable to conclude that higher property prices are the biggest cause of lower ownership rates,” he said.

A Grattan spokesman said the only way young people can afford to buy a house is with help from “the bank of mum and dad”.

“Inheritances tend to transmit wealth to children who are already well-off, and home ownership is more likely among those who receive an inheritance, and more likely still among those who receive larger inheritances,” he said.

“Australia is becoming wealthier, but much of the increase is concentrated in the hands of older generations. The trend is unmistakeable: unless something changes, the young will fall further behind and inequality will get worse.”

Originally Published: brisbaneinvestor.com.au

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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

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debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.

According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.

If that happens, it would also cause an economic “catastrophe”.

Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.

“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“That’s higher than any other country in the Western world by a long way.

“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.

“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

He said foreclosures had also risen by 600 per cent in the region.

“The mortgage stress is definitely being felt especially in this area,” he said.

60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.

What does a million dollars buy in Aussie capital cities?

debt bomb

Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.

“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.

But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.

One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.

Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.

And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.

That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.

“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.

Related article: Experts warn of ‘debt bomb’ as housing downturn worsens

Source: news.com.au

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Opinion

Queensland is the next property hotspot, experts say

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Queensland is the next property hotspot, experts say

As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.

According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.

Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.

Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.

The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.

The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.

NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.

“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.

Source: brisbaneinvestor.com.au

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Opinion

Gold Coast house values record the biggest growth in Queensland

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Gold Coast house values record the biggest growth in Queensland

The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.

GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.

The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.

Unit prices are up 1.9 per cent to $428,000.

Gold Coast house values record the biggest growth in Queensland
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.

REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.

“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.

“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”

A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.

Gold Coast house values record the biggest growth in Queensland
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams

REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.

“I expect the market to remain strong,” he said.

“There is a heavy amount of interstate buyers moving here.

“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”

Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.

Gold Coast house values record the biggest growth in Queensland
The Gold Coast property market is expected to remain strong.

“We have some of the best health facilities in the country and our universities are world recognised.

“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”

The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.

It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.

Gold Coast house values record the biggest growth in Queensland
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham

Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.

“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.

“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”

Source: brisbaneinvestor.com.au

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