A global credit rating firm believes unemployment is the greatest risk facing the Australian housing market... Low interest rates the "new normal"...
Unemployment the real risk to Australian housing market
A global credit rating firm believes unemployment is the greatest risk facing the Australian housing market.
According a Fairfax Media article, ratings agency S&P Global’s Asia-Pacific REITs' Large Buffer Will Bear A Downturn report claims that Australia’s housing market will remain relatively safe for the near future unless there is a significant spike in unemployment.
“We don't anticipate a sharp correction in house prices in the near term," S&P analysts Craig Parker and Graeme Ferguson wrote in the report.
“However, a scenario of the early 1990s where, unemployment reached 11% would place households under severe financial stress,” Parker and Ferguson wrote.
According to Parker and Ferguson, an increase in unemployment would pose an even bigger risk to the housing market if it coincided with a rise in interest rates as an increase in consumer debt in recent years has left households with little room to move.
“The rising household debt has lowered the headroom if the economy were to deteriorate or when interest rates rise," the S&P report said.
S&P’s cautious outlook for the housing market follows that of fellow ratings giant Moody’s who last week raised similar concerns about household debt levels.
(Your Investment Property)
Low interest rates the "new normal"
Interest rates are likely to remain at historical lows for the next decade, a large mortgage broker network has said.
1300HomeLoan managing director, John Kolenda, said the Reserve Bank of Australia is unlikely to return its cash rate to levels previously considered “normal”.
He said the official rate now at a record low of 1.75% will be the “new normal” with consumers more sensitive now to the impact of higher interest rates.
“We are unlikely to see official interest rates move to pre global financial crisis (GFC) levels and the standard norm of the future will be lower than historical levels for the next decade,” Kolenda said.
“The monetary policy game has changed and the RBA has found cutting its cash rate is not necessarily an instant remedy for economic stimulus.”
Conversely, according to Kolenda, a cash rate rise would lead to “disastrous” impacts on consumer confidence and the economy. He suspects the cash rate will be cut again.
“Consumers are now very rate sensitive and when they rise they are likely to stop spending and revert to saving.
“This is why we will see rates remain at historical lows or around levels we have experienced for the last number of years. Over the short term it will likely be lower.”
(Australian Broker)
A global credit rating firm believes unemployment is the greatest risk facing the Australian housing market.
According a Fairfax Media article, ratings agency S&P Global’s Asia-Pacific REITs' Large Buffer Will Bear A Downturn report claims that Australia’s housing market will remain relatively safe for the near future unless there is a significant spike in unemployment.
“We don't anticipate a sharp correction in house prices in the near term," S&P analysts Craig Parker and Graeme Ferguson wrote in the report.
“However, a scenario of the early 1990s where, unemployment reached 11% would place households under severe financial stress,” Parker and Ferguson wrote.
According to Parker and Ferguson, an increase in unemployment would pose an even bigger risk to the housing market if it coincided with a rise in interest rates as an increase in consumer debt in recent years has left households with little room to move.
“The rising household debt has lowered the headroom if the economy were to deteriorate or when interest rates rise," the S&P report said.
S&P’s cautious outlook for the housing market follows that of fellow ratings giant Moody’s who last week raised similar concerns about household debt levels.
(Your Investment Property)
Low interest rates the "new normal"
Interest rates are likely to remain at historical lows for the next decade, a large mortgage broker network has said.
1300HomeLoan managing director, John Kolenda, said the Reserve Bank of Australia is unlikely to return its cash rate to levels previously considered “normal”.
He said the official rate now at a record low of 1.75% will be the “new normal” with consumers more sensitive now to the impact of higher interest rates.
“We are unlikely to see official interest rates move to pre global financial crisis (GFC) levels and the standard norm of the future will be lower than historical levels for the next decade,” Kolenda said.
“The monetary policy game has changed and the RBA has found cutting its cash rate is not necessarily an instant remedy for economic stimulus.”
Conversely, according to Kolenda, a cash rate rise would lead to “disastrous” impacts on consumer confidence and the economy. He suspects the cash rate will be cut again.
“Consumers are now very rate sensitive and when they rise they are likely to stop spending and revert to saving.
“This is why we will see rates remain at historical lows or around levels we have experienced for the last number of years. Over the short term it will likely be lower.”
(Australian Broker)
