Comments from Steve Jovcevski. He is a property expert at financial comparison site Mozo.com.au,
You can read more about Steve on the Mozo blog here: https://mozo.com.au/blog/
High credit quality
Strict lending criteria and serviceability requirements ensure Aussie home borrowers who are approved for a loan are quality candidates and can generally afford to repay it. For instance, borrowers can no longer borrow 100% of the property but are required to have at least five per cent deposit and pay Lender’s Mortgage Insurance on low deposit loans.
In addition to tighter regulations, lenders can also seek financial retribution if a borrower defaults on their home loans. For this reason, borrowers are less likely to default their home loan, resulting in fewer foreclosures.
For a massive property collapse to occur, we’ll need to see wide scale job losses and foreclosures which is in fact, the opposite of what is happening in Australia with unemployment at a steady six per cent.
Regulatory bodies are doing their job
Financial bodies such as the Australian Prudential Regulation Authority are keeping a closing eye on the housing market. Last year when APRA found there were too many investors driving up the market, it stepped in to enforce a 10 per cent cap on investor lending growth.
We’re not the US
Earlier this year, investment expert Jonathan Tepper on 60 Minutes tipped that the mortgage bubble in Australia as well as the United States and Ireland would burst with property values plummeting up to 50%. While these predictions gained a fair share of concern, Tepper’s predictions did not compare apples with apples.
Instead, we need to compare large cities with other large cities such as Sydney and New York that tend to behave quite similarly.
We’ve seen this before
It may be difficult to remember the peak of the last property boom all the way back in 2003, but I can guarantee you we were hearing similar doomsday predictions about the property bubble bursting. In terms of the way borrowers are leveraged today versus 13 years ago –it’s pretty comparable.
Because we didn’t have a property bust back then, it’s highly unlikely we’re on the brink of having one now.
Steve is Mozo’s property investment and lending expert. With an extensive knowledge of home loan products and property trends, Steve is full of practical tips to help first homebuyers, refinancers or investors build and get the most out of their property portfolio.