Housing, page-45

  1. 10,776 Posts.
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    Hi malmanu
    I'm not sure where you are getting the 10% national average from, but in the later 70s and late 80s when domestic mortgage rates reached circa 17% for residential mortgages and circa 21% for commercial property loans the norm was a fall of 30/40%, and in many cases 50%. It was a blood-bath. No Australian city was exempt. In these two cases whomever came up with a national average of 10% was living in Disneyland. Keep in mind that these two instances were before the days of computers and readily available data from the Valuer Generals Office was not available. And even if it was, collating that 10% figure would have taken a caste of thousands, given it could only be derived by hard copy analysis. A job for the Rain Man and his savant brothers that would have still taken years to accomplish.
    That said, I agree with you on your second and third points. On your second point consider that should current, variable mortgage rates increase by only 2% (as they possibly will in time), then that would mean a rise of circa 30% in monthly mortgage repayments, thereby making it near impossible for the average household to maintain payments, given the excessive borrowings folks are now committed to. On your third point, yes, most households are geared to dual incomes, and have been since the early 70s. If the Oz economy tanks for whatever reason, be it rising interest rates or a significant China slow down, then at least one person in a couple responsible for mortgage repayments will lose their job. This is what happened in the 70s and 80s crashes. The RE market was swamped by distressed mortgagees and property price plummeted. A salient reminder of what could be in the not too distant future. Even so, while China maintains its growth and interest rates remain low I see a soft landing in the near future. The distant future (two years away), who knows. As the old saying goes: in the good times prepare for the worst, and in the bad times prepare for the good.
 
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