We saw this article in the Sydney Morning Herald (SMH) this morning: Mortgage pain for 750,000 owners
UP TO 300,000 Australians risk losing their homes this year as rising interest rates and the credit crunch fuel severe debt.
As the Reserve Bank prepares to meet on Tuesday to consider another rate rise, analyst Martin North of Fujitsu Consulting predicted a dramatic escalation in defaults on home loans.
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The repossession spike affects not only existing home owners – it has a trickle-down impact on all aspects of housing.
Mr North said the high interest rates and rising prices were preventing first-time buyers from getting onto the property ladder, leaving them competing in an ever more competitive private rental market.
Rents are already increasing by up to 10 per cent a year and tenants’ advisory services in Sydney say that many renters were too frightened by the threat of eviction to contest unfair hikes.
In turn, increasing numbers of the poorest families are competing for a dwindling stock of social housing, many facing several years wait to secure a property.
Paul Gibson, state MP for Blacktown, said: “In 20 years I have not seen anything like this.
This is what we have been warning for a very long time already (see Are Australian residential properties good investments?). Listen, politicians: if you want to solve the housing affordability and rental crisis, then you should do as we said in Myths on the Australian housing/rental crisis & its implications:
… the only sustainable solution is to introduce/change policies that will encourage a sustained decline in property prices (e.g. remove Capital Gains Tax exemption, close negative gearing loophole)- we recognize that such solutions are politically costly (nobody wants to see the value of their property fall). If the government will not make such a move, then sustained interest/mortgage rates rise will have to step in to do the job.
Such policies will be initially painful, but it will put Australia back to a more sustainable growth path with regards to housing. If politicians fail to do that, then there will be bigger and greater pains for more people in the years to come.
