First-time home buyers are turning to a rapidly growing source of finance: The Bank of Mom and Dad... Housing risk overdone, RBA unlikely to cut, Morrison says...
Mom and Dad become the country's fastest-growing mortgage lenders
(Bloomberg) -- Beset by lending curbs and bubble-esque prices, first-time home buyers are turning to a rapidly growing source of finance: The Bank of Mom and Dad.
More parents are taking advantage of record-low interest rates to refinance their properties and help their grown-up kids onto the housing ladder amid sky-rocketing house values. Digital Finance Analytics estimates the number of Aussies getting help from their parents has soared to more than half of first-home buyers from just 3 percent six years ago.
Australia's housing rally has favored baby-boomers and locked out youth, compounding an inter-generational shift of wealth. As the number of bank loans to first-time buyers dwindles, the average slice of cash handed to them by parents has almost quadrupled in the past six years, DFA says. The downside: a market that the Reserve Bank of Australia is already wary of may get further inflated.
First-time buyers are "being infected by the notion that property is about wealth building, rather than somewhere to live,” said Martin North, Principal at DFA. That “may be tested if interest rates rise later, or property prices fall from their current illogical stratospheric levels.”
Sydney, where values have risen more than 90 percent since the end of 2008, remains the priciest city; it was last month named the world’s fourth bubbliest market by UBS Group AG.
The boom is turning some homes into cash dispensers. More than two thirds of owners that refinanced houses worth more than A$750,000 did so to extract capital for reasons including helping their kids. Near the start of 2010, the average helping hand from parents was about A$23,000; today, it's more than A$80,000.
Housing risk overdone, RBA unlikely to cut, Morrison says
(Bloomberg) -- Treasurer Scott Morrison said debate on Australia’s housing market is prone to exaggeration -- even as Sydney property prices rise anew -- and indicated he doesn’t see much appetite at the central bank for further cuts in the nation’s already record-low interest rates.
There’s “no evidence” the property market is overvalued outside “arguably some pockets if x and y and z happened, and x and y and z as yet has not happened,” he said in an interview at the International Monetary Fund’s headquarters in Washington. “So I think these risks can be overstated. They can be really overstated. ”
A three-year surge in Australian home prices paused at the end of 2015 after banks raised mortgage rates to offset the cost of holding more capital. The market is taking off again as a growing population tries to squeeze into too few properties: Sydney house prices are up 14 percent this year through September, compared with 9 percent across the nation’s major cities, according to CoreLogic Inc.
The market has been fueled by an easing cycle begun late in 2011 that brought the cash rate to 1.5 percent as the central bank sought to counter the drag from plunging mining investment. But a jump in exports and a residential construction boom has helped lift annual economic growth to 3.3 percent in the second quarter and unemployment fall to 5.6 percent in August.
(Bloomberg) -- Beset by lending curbs and bubble-esque prices, first-time home buyers are turning to a rapidly growing source of finance: The Bank of Mom and Dad.
More parents are taking advantage of record-low interest rates to refinance their properties and help their grown-up kids onto the housing ladder amid sky-rocketing house values. Digital Finance Analytics estimates the number of Aussies getting help from their parents has soared to more than half of first-home buyers from just 3 percent six years ago.
Australia's housing rally has favored baby-boomers and locked out youth, compounding an inter-generational shift of wealth. As the number of bank loans to first-time buyers dwindles, the average slice of cash handed to them by parents has almost quadrupled in the past six years, DFA says. The downside: a market that the Reserve Bank of Australia is already wary of may get further inflated.
First-time buyers are "being infected by the notion that property is about wealth building, rather than somewhere to live,” said Martin North, Principal at DFA. That “may be tested if interest rates rise later, or property prices fall from their current illogical stratospheric levels.”
Sydney, where values have risen more than 90 percent since the end of 2008, remains the priciest city; it was last month named the world’s fourth bubbliest market by UBS Group AG.
The boom is turning some homes into cash dispensers. More than two thirds of owners that refinanced houses worth more than A$750,000 did so to extract capital for reasons including helping their kids. Near the start of 2010, the average helping hand from parents was about A$23,000; today, it's more than A$80,000.
Housing risk overdone, RBA unlikely to cut, Morrison says
(Bloomberg) -- Treasurer Scott Morrison said debate on Australia’s housing market is prone to exaggeration -- even as Sydney property prices rise anew -- and indicated he doesn’t see much appetite at the central bank for further cuts in the nation’s already record-low interest rates.
There’s “no evidence” the property market is overvalued outside “arguably some pockets if x and y and z happened, and x and y and z as yet has not happened,” he said in an interview at the International Monetary Fund’s headquarters in Washington. “So I think these risks can be overstated. They can be really overstated. ”
A three-year surge in Australian home prices paused at the end of 2015 after banks raised mortgage rates to offset the cost of holding more capital. The market is taking off again as a growing population tries to squeeze into too few properties: Sydney house prices are up 14 percent this year through September, compared with 9 percent across the nation’s major cities, according to CoreLogic Inc.
The market has been fueled by an easing cycle begun late in 2011 that brought the cash rate to 1.5 percent as the central bank sought to counter the drag from plunging mining investment. But a jump in exports and a residential construction boom has helped lift annual economic growth to 3.3 percent in the second quarter and unemployment fall to 5.6 percent in August.
