Economists fear lack of savings as housing market’s ‘key crunch still to come’
AUSTRALIA is having the house price slump it had to have but the big crush is yet to come, one of the nation’s leading economic forecasters has warned.
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AUSTRALIA is having the house price slump it had to have but the big crush is yet to come, one of the nation’s leading economic forecasters has warned.
Deloitte Access Economics has also urged the nation to exercise more thrift, noting households are only saving 1 per cent of their income.
That is down from 7.5 per cent as recently as 2015 and comes at a time when house prices have further to fall and major lenders are turning off the flow of credit.
The warning also comes as new research from Roy Morgan shows close to 1 million property owners are facing mortgage stress.
Polling found 949,000 mortgage holders are now considered to be in mortgage stress. While the number is elevated, it is an improvement from the 974,000 recorded a year ago.
Deloitte Access Economics economist Chris Richardson said that, while the willingness of families to raid their piggy banks had boosted the economy at a time when the mining boom had faded, the trend was becoming a concern.
“That trend is making us a little bit twitchy,” Mr Richardson said.
“The last time families saved next to nothing in this nation was the first half of the decade of the 2000s — also a period in which house prices went for a bit of a canter.
“Yet conditions are rather different today — house prices are falling in Australia, and they’re unlikely to be providing much joy to the punters any time soon.
“Over time, it makes sense to save more than Australians are currently doing.”
The comments were delivered in Deloitte’s latest Business Outlook, to be released today.
Mr Richardson said Melbourne and Sydney were having house prices falls “we had to have” given prices “have long since streaked past credible valuation measures”.
Tighter lending conditions, rising international interest rates, the pullback in lending to property investors and the potential end of negative gearing should the federal government change would continue to weigh on prices, Mr Richardson said.
“The key crush on Australian housing markets is coming as the big banks tighten the spigots on credit — particularly housing credit,” he said.
AMP chief economist Shane Oliver last week downgraded his outlook for the housing market, predicting prices in Melbourne and Sydney would fall by 20 per cent by 2020.
Mr Richardson said while the outlook for housing was challenging, the economy was taking the downturn in its stride as growth continued to accelerate.
Wage growth was also set to slowly rise over the next few years but Mr Richardson warned that would end up being a “Faustian bargain” as higher interest rates hit households.
Originally published as Economists fear lack of savings as housing market’s ‘key crunch still to come’