The Urban Developer
AdvertiseEventsWebinarsUrbanity
Industry Excellence
Urban Leader
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
UPCOMING EVENT - INDUSTRIAL AND LOGISTICS SUMMIT 16 OCTOBER, SYDNEY
INDUSTRIAL AND LOGISTICS SUMMIT - TICKETS NOW ON SALE
LEARN MOREDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
17
print
Print
FinanceDinah Lewis BoucherFri 05 Oct 18

Housing Market Crash Unlikely but Mortgage Stress an Issue: Report

d54035d5-1e21-4ce2-a204-6bff77f208fc

Mortgage availability has tightened thanks to property cooling measures putting downward pressure on housing prices, a new report says.

In its October 2018 Viewpoint report, Pimco warns mortgage serviceability is expected to deteriorate due to rising mortgage rates as bank funding costs head higher, combined with the policy-induced switch from interest-only to principal-and-interest loans.

“We expect housing prices to continue to fall moderately by about 10 per cent over the next couple of years," Pimco said in its report.

"We estimate that a 200 basis point increase in Australian mortgage rates, a commonly adopted stress-test assumption at mortgage origination, could increase mortgage payments from 38 per cent of pre-tax income to close to 48 per cent."

Last month Corelogic data revealed increasing rates which had previously impacted the investor market segment was now affecting owner-occupiers.

Australia’s total housing debt stands at 140 per cent of gross disposable income and mortgage payments are 38 per cent of median pre tax income.

Mortgages represent two-thirds of bank lending in the country so changes in the housing market directly affect the credit profile of banks.

Pimco anticipates the out-of-cycle mortgage rate hikes by banks will keep the RBA on hold for longer.

“This underpins our view that the new neutral rate in Australia is low, around three per cent, compared with the RBA’s estimate of 3.5 per cent."

However, it’s not all bad news. Australia’s long-term housing market health is anchored by a relative balance in supply and demand factors.

“We do not envision a housing market crash in Australia that is severe enough to threaten broad financial stability.

“Nationwide run-rate housing supply has come down from two years ago and is now roughly on par with run-rate housing demand. Moreover, the surplus supply of the past few years can be offset by the deficit accumulated over the decade since the global financial crisis.”

Australian housing demand is bolstered by healthy population growth of about 1.25 per cent annually, with approximately equal contributions from natural growth and net overseas migration.

OtherAustraliaReal EstateSector
AUTHOR
Dinah Lewis Boucher
More articles by this author
ADVERTISEMENT
TOP STORIES
a land lease community home in white at a gemlife development, a type of home which could be the answer to the housing crisis
Residential

‘We are the Solution’: Land Lease Shake-Up Stirs into Life

Renee McKeown
5 Min
Korean coliving hero
Exclusive

Disconnection by Design: Why ‘Untech’ is the Next Big Amenity

Clare Burnett
5 Min
Global Shifts Redraw the Map for Australia’s Office Market
Exclusive

Office Eyes Slowdown as New Stock Supply Becomes a Trickle

Vanessa Croll
7 Min
Salta MD Sam Tarascio
Exclusive

Why Salta Won’t Break Ground on $400m Pipeline

Leon Della Bosca
7 Min
Exclusive

Precinct Proposals Bloom as Brisbane Middle-Ring Sheds its Past

Phil Bartsch
8 Min
View All >
a land lease community home in white at a gemlife development, a type of home which could be the answer to the housing crisis
Residential

‘We are the Solution’: Land Lease Shake-Up Stirs into Life

Renee McKeown
Darwin Sentinel Industrial East Arm Deal hero
Industrial

Sentinel Property Expands NT Portfolio with $57.4m Buy

Phil Bartsch
Legal

Court Freezes Assets as $160m Property Scheme Unravels

Vanessa Croll
From Main Beach apartments to Southport towers, projects are frozen while receivers trace investor funds and builder cla…
LATEST
a land lease community home in white at a gemlife development, a type of home which could be the answer to the housing crisis
Residential

‘We are the Solution’: Land Lease Shake-Up Stirs into Life

Renee McKeown
5 Min
Darwin Sentinel Industrial East Arm Deal hero
Industrial

Sentinel Property Expands NT Portfolio with $57.4m Buy

Phil Bartsch
2 Min
Legal

Court Freezes Assets as $160m Property Scheme Unravels

Vanessa Croll
2 Min
Industrial

Centennial’s Paul Ford: From Vision to Industrial Vanguard

David Di Marco
3 Min
View All >
ADVERTISEMENT
Article originally posted at: https://www.theurbandeveloper.com/articles/rising-loan-costs-to-hit-housing-affordability-but-no-housing-crash-imminent-pimco