The Reserve Bank has warned that if property values continue to fall heavily, particularly in Sydney and Melbourne, it could push some borrowers into"negative equity"."Negative equity" is when the outstanding amount on a mortgage is higher than the value of the propertyA pre-election interest rate cut at the next Reserve Bank meeting in May now appears unlikely
The RBA was also concerned that"substantially larger price falls would see a large share of households' housing equity eroded or even turn negative". It also warned that rising unemployment would"increase the risk of costly defaults for lenders … compounding the somewhat tighter availability of credit seen to date".
The fallout from the housing correction has been coupled with tighter lending standards from banks — after revelations of misconduct and poor practices emerged in last year's banking royal commission. The Financial Stability Review noted that household debt in Australia remains at a high level, but many households would still be able to service their loans even after losing a job because of"accumulated prepayment buffers".
Despite that, the RBA said stress tests have shown banks have sufficient capital to withstand a scenario of double-digit unemployment and housing price falls of more than 30 per cent.
Excellent point.
Anyone noticing what’s happening to rental costs☝🏼 Hate to think what’s going to happen to rental rates if property prices drop further and property’s for sale stay low for years on end .. 😬
Only if they want to sell or borrow funds against their property. If they sell and buy, there is that same imposition on the home they are buying. No problems at all.
You mean house prices are at a more reasonable price and not controlled by speculators
Peter_F_Ryan. RBAInfo Yet we need falling house prices for affordable housing. Australia has successfully maneuvered itself into dead end street. Perpetual growth narrative. High construction/energy cost, Capitals full, High immigration, Speculators with printed Chinese money
negativeequity
Well yes. They do.
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