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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>It&#x27;s been a hell of a year for us poor folk in property, hasn&#x27;t it?</p><p>For the vast majority of the industry, we entered the year with a rather dark cloud hanging over our heads. </p><p>Sydney and Melbourne were leading the country down a <a href="https://theurbandeveloper.com/articles/how-does-the-housing-downturn-compare-to-previous-cycles-">slippery slope</a> in residential housing prices and the rest of the country was holding their breath in anticipation of how low the <a href="https://theurbandeveloper.com/articles/housing-values-record-sharper-decline-than-apartments-moodys">bottom</a> would go. </p><p>The <a href="https://theurbandeveloper.com/articles/nsw-government-releases-final-opal-tower-report">Opal Tower incident</a> over Christmas signalled the first signs of “cracking” hitting the media in the industry&#x27;s battle with <a href="https://theurbandeveloper.com/articles/mascot-towers-moving-downward-update">building quality issues</a>.</p><p>We also returned from summer holidays with the shadow of a <a href="https://theurbandeveloper.com/articles/banking-industry-culture-driven-by-profit-and-greed-banking-royal-commission">royal commission</a> into banking looming over the broader economy. </p><p>By the end of February, most of us were asking ourselves: are we destined for the <a href="https://theurbandeveloper.com/articles/property-prices-fall-at-fastest-rate-since-gfc-abs-">first recession in three decades </a>or will the Australian economy—and property sector—defy history to record another consecutive year of growth?</p><p>Commissioner Hayne then released his findings into the banking sector and the political hot potato of bank bashing (most of it largely justifiable) was intensifying with the prospect of a federal election on the immediate horizon.</p><p>Enter the federal election campaign and the obligatory “tools down” mentality for the industry. </p><p>The industry was weighing up the strong policy and reform agenda of Labor&#x27;s Bill Shorten with the less complex “business as usual” agenda of the unelected incumbent prime minister Scott Morrison. </p><p>Big infrastructure was on the table for both parties, with significant reforms to negative gearing, superannuation and franking credits proposed by the favourite Shorten.</p><p>To nearly everyone&#x27;s surprise, “<a href="https://theurbandeveloper.com/articles/what-the-australian-property-industry-can-learn-from-scomos-miracle">Scomo</a>” pulled off one of the most unexpected victories in Australian political history and, as they say, the rest is history.</p><p>For most across the industry, there was an immediate sigh of relief following the <a href="https://theurbandeveloper.com/articles/what-the-australian-property-industry-can-learn-from-scomos-miracle">federal election result</a> with the certainty of &#x27;business as usual&#x27; and the uncertainty of major tax reform for property off the table for now.</p><p>Author&#x27;s note: I make no comment on the importance of these policy reforms, for now. (Yeah I know, cop out!)</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>With a bit of wind in our sail, the industry dusted themselves off and started calling for some relief from the banking sector, in the form of both <a href="https://theurbandeveloper.com/articles/075-is-a-record-low-but-dont-think-for-a-second-the-reserve-bank-as-finished-cutting-the-cash-rate">interest rate cuts</a> from the Reserve Bank and <a href="https://theurbandeveloper.com/articles/apra-scraps-loan-buffer">relaxations to borrowing limits</a> from the Australian Prudential Regulatory Authority. </p><p>Whilst our industry was indulging in the challenges of the market, the rest of the country was suffering from one of the worst droughts on record. </p><p>With no relief in sight for the farmers, the industry was boosted with a mid-year interest rate cut which was promptly followed by changes to the borrowing caps imposed on Australian banks by the regulator and then a second interest rate cut in October. </p><p>And like a moth to the flame, the resilient residential market in Sydney and Melbourne—followed by most of the country—started to turn around from the middle of the year to finish the year with one of the sharpest declines and subsequent <a href="https://theurbandeveloper.com/articles/-property-prices-forecast-to-rise-in-2020">recoveries</a> in Australian history. </p><p>It has been a remarkable year for those that live and breath property. </p><p>I don&#x27;t think any pundit out there could have predicted how the events of the year transpired. </p><p>It&#x27;s been a year of surprises—many of them painful, many of them pleasant.</p><p>However, we sit here with only weeks remaining in the working year with the same question on our lips: are we destined for the first recession in three decades or will the Australian economy—and property sector—defy history to record another consecutive year of growth?</p></div></div></div></div></div>

The Urban Developer founder and CEO Adam Di Marco shares his views on the year that was. 

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Property giant Dexus has snapped up the Reserve Bank&#x27;s Melbourne headquarters in a $160 million deal.</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>In a slightly smaller second deal Dexus also acquired the property next door, at 52 Collins St, for $70 million.</p><p>Dexus flagged plans to amalgamate the two sites and develop a total 35,000sq m in the medium term. </p><p>&quot;These acquisitions provide us with a presence in the tightly-held &#x27;Paris end&#x27; of Collins Street in the Melbourne CBD,&quot; Dexus chief executive Darren Steinberg said.</p><p>&quot;They also present us with a unique opportunity to undertake an office development creating long term value for investors in the next supply cycle.&quot;</p><p>Related: <a href="https://theurbandeveloper.com/articles/qic-acquisitions-brisbane-melbourne">QIC Lists Up to $2 Billion of Assets</a></p><p>Dexus office and industrial executive general manager Kevin George said Dexus expected office demand in Melbourne to remain strong.</p><p>&quot;[With] the vacancy rate to fall below 4 per cent next year and remain well below long term averages for the foreseeable future.&quot;</p><p>Surging demand for office space in Melbourne has <a href="https://theurbandeveloper.com/articles/melbournes-office-market-posts-strong-second-quarter-results">pushed the vacancy rate</a> to shrink below 4 per cent.</p><p>Settlement for 60 Collins St is expected by the end of October, while 52 Collins St is expected to settle in July 2019.</p></div></div></div></div></div>

Property giant Dexus has yesterday announced plans to purchase 60 Collins St, Melbourne for $160 million from the Reserve Bank.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The Reserve Bank of Australia has cut the cash rate by 25 basis points to a new historic low of 1 per cent.</p><p>The RBA’s decision to lower the cash rate marks the <a href="https://theurbandeveloper.com/articles/rba-cuts-to-record-lows-so-how-will-the-cash-rate-cut-impact-the-property-market">second interest rate cut</a> in two months as RBA governor Philip Lowe says the central bank’s focus is on the nation’s economy and rising unemployment.  </p><p>“Today&#x27;s decision to lower the cash rate will help make further inroads into the spare capacity in the economy,” Lowe said.</p><p>“It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>How Lowe will we go? </strong></h2><p>The bank’s decision to lower interest rates to historic lows was anticipated by 21 out of 32 economists polled by Bloomberg.</p><p>Following Tuesday’s cut, Capital Economics thinks the bank will again slash interest rates to 0.5 per cent by early next year. </p><p>While AMP Chief Economist <a href="https://theurbandeveloper.com/articles/australian-house-prices-closer-to-the-bottom-amps-shane-oliver">Shane Oliver </a>says he expects rates will drop at least once more before year&#x27;s end. </p><p>“We’ll see the next cut probably in November and then another cut coming early next year, which ultimately will take the cash down to an ultra record low of just 0.5 per cent,” Oliver said. </p><p>Corelogic research analyst Cameron Kusher says the RBA&#x27;s decision is an attempt to support the economy, a move that has “very little to do with housing market conditions”.</p><p>“In fact, the ongoing <a href="https://theurbandeveloper.com/articles/moderate-house-price-declines-for-remainder-of-2019-moodys-says">slowing of the rate of decline</a> in dwelling values throughout 2019 and the <a href="https://theurbandeveloper.com/articles/sydney-and-melbourne-property-prices-rise-first-since-2017">recent uptick</a> in Sydney and Melbourne dwelling values, would likely have reduced concerns of further wealth erosion from housing.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>The economy</strong></h2><p>Over the year to the March quarter, the nation’s economy grew at a below-trend 1.8 per cent.</p><p>And while Lowe described the scenario for Australia’s economy as remaining “reasonable” with “growth around trend expected” he said consumption growth had been subdued dampened by a period of low income growth and <a href="https://theurbandeveloper.com/articles/the-anatomy-of-australias-housing-downturn-bis">declining housing prices</a>. </p><p>“The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income is expected to support spending,” Lowe said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8a2c6222-b0e1-4ffa-96e4-5afd2e470728.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲Back-to-back cuts: In the space of four weeks the rate has gone from 1.5 per cent to a new record low of 1 per cent.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br>‘<strong>Major boost to housing affordability’  </strong></h2><p>While the Reserve Bank’s motive to move may have little to do with the housing market, the latest cut will help <a href="https://theurbandeveloper.com/articles/best-housing-affordability-best-since-2016-anz-corelogic-">affordability for home buyers</a>... providing the banks pass it on. </p><p>Real Estate Institute of Australia president Adrian Kelly describes the second cut as “a major boost to housing affordability”. </p><p>“Subject to the banks passing on the cuts in full, this means that for each $100k borrowed annual payments decrease by $500,” Kelly said. </p><h2><strong>As for the big four... </strong></h2><p>ANZ bank said it will pass on the full 25 basis point rate cut to borrowers, but Commbank, Westpac and the National Australia Bank will not. </p><p>Instead, Commbank announced a 0.19 per cent rate cut for its principal and interest customers, but the full 0.25 percentage point for interest-only mortgage holders. </p><p>NAB announced cuts of 0.19 percentage points, and Westpac will pass on 0.20 per cent cut for owner occupier customers and a reduction of 0.35 per cent for customers with interest-only repayments. </p><p>The Reserve Bank’s back-to-back <a href="https://theurbandeveloper.com/articles/rba-cuts-to-record-lows-so-how-will-the-cash-rate-cut-impact-the-property-market">record cut</a>s, combined with <a href="https://theurbandeveloper.com/articles/apra-scraps-loan-buffer">APRA’s recent moves</a> on mortgage lending, are factors Kusher describes as “likely to to be further positives for the housing market” likely to encourage a “gradual levelling in the housing downturn nationally”.</p><p><a href="https://theurbandeveloper.com/articles/sydney-and-melbourne-property-prices-rise-first-since-2017">National housing market data released this week</a> reveals a 0.2 per cent fall in June, with Corelogic describing this as the smallest month-on-month decline since March last year.</p><p>The latest figures show Sydney dwelling values have dropped 14.9 per cent since peak, while Melbourne dwelling values have dropped 10.9 per cent since peak.</p><p>The peak-to-trough decline for the nation’s <a href="https://theurbandeveloper.com/articles/sydney-and-melbourne-property-prices-rise-first-since-2017">combined capital cities</a> sits at 10.2 per cent.</p></div></div></div></div></div>

Back-to-back cuts: The RBA has cut rates for a second time to a fresh new low of 1 per cent.

Call for Help as Construction Insolvency Crisis Looms  

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The federal government must help the high-rise construction industry as it faces an imminent insolvency crisis brought on by the Covid pandemic, say apartment developers.</p><p>Speaking at <em>The Urban Developer&#x27;s</em> vSummit on the Australian property outlook, developer Tim Gurner said although 2020 had been big for him in terms of acquisitions, the wider construction industry had seen a huge downturn in CBD projects. </p><p>“The city construction firms are seriously hurting and the builders are desperate for work, particularly in Victoria,” Gurner said.</p><p>“If the state government doesn&#x27;t get serious about getting construction activity going in the city soon there’s going to be significant hurt. This year is going to be tough, there’s going to be some <a href="https://theurbandeveloper.com/articles/economists-warn-of-surging-house-prices">shake out</a>.</p><p>“We’ve got to see what happens out of Jobkeeper, we’ve got to see what businesses can survive that.”</p><p>Sarah Slattery, managing director of quantity surveying firm Slattery, warned an insolvency crisis was looming for the construction industry. </p><p>“There’s a huge risk [of insolvency] and we are advising clients to do their due diligence … who knows who will survive,” Slattery said.</p><p>“A lot of work was completed last year but new work hasn’t come in behind it. <a href="https://theurbandeveloper.com/articles/construction-industry-further-stimulus-liquidated-damages-coronavirus">Construction work</a> is at an all-time low from 12 months ago. Covid and lockdown were major disruptions.” </p><p>Gurner&#x27;s comments were supported by Queensland developer Don O’Rorke, the chairman of <a href="https://theurbandeveloper.com/articles/895-ann-st">Consolidated Properties</a>.</p><p>“HomeBuilder obviously applies to house and land—there hasn’t really been any stimulus provided by the federal or state governments for apartment building,” O’Rorke said.</p><p>“That’s really been an issue in terms of off-the-plan sales for us.”</p><p>O’Rorke said the luxury high-end market was under-serviced and Consolidated Properties would focus on this market segment to shore up its workflow.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Companies entering external administration - quarterly</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/6a177767-47fd-4814-bc16-94a12e175a78.png" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sub>^Source: ASIC and CBRE Research</sub></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Slattery said the price of construction had forced prices down 10 to 15 per cent in Sydney and Melbourne, putting downward pressure on margins. </p><p>She said tier-two construction firms were down as low as 2 per cent while tier one margins had dropped from an average of 6 per cent down to about 3 per cent.</p><p>Slattery said confidence in the sector and the resumption of immigration, particularly international students, would help  stimulate the construction industry.</p><p>Former CBRE researcher Ben Martin-Henry said there was a significant number of zombie companies—businesses that relied completely on fund assistance—underpinned by JobKeeper, which is due to end in March. </p><p>Martin-Henry predicted the number of business insolvencies would spike in the first half of 2021. </p><p>The Reserve Bank estimates a further 5,200 business will fail on top of the usual closures (not all are insolvencies) of 15,000 to 20,000 per year if business revenue falls by the forecast 9.5 per cent in 2020-21.</p></div></div></div></div></div>

Apartment Developers Demand Help for Looming Construction Insolvency Crisis Apartment developers are calling on the federal government...

▲ Construction workers arriving at work. NAB's most recent survey states that construction costs and labour availability are the two biggest concerns for the property sector.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Construction costs have been highlighted as the biggest factor to constrain new residential development during the last quarter of 2021. </p><p>According to NAB’s latest quarterly residential property survey, construction costs were a very significant constraint in Western Australia and a significant constraint in all other states. </p><p>The Reserve Bank of Australia’s statement on monetary policy showed that while investment in housing was unchanged in the third quarter of 2021, there was still a large pipeline of residential construction work to be completed. </p><p>This includes more than 120,000 new dwelling projects that started construction in the second and third quarters of 2021. </p><p>The forecast is that dwelling investment will remain high as construction projects in the pipeline are completed, on the back of resilient construction activity in the third quarter of 2021 despite pandemic restrictions.</p><p>The RBA also said people spending more time at home had fuelled a desire to improve their homes and this had added to solid construction activity and investment. </p><p>Household income and wealth growth, and population growth after international borders are reopened, are also expected to increase the levels of residential construction for several years. </p><p>The RBA said that it was possible supply constraints could “intensify or persist for longer than expected”.</p><p>It said such constraints were mostly due to increased demand and temporary disruptions due to the pandemic preventing supply being able to respond to that demand fast enough.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/f36bfe18-bd66-4132-a559-a5aed6e832f0.jpg" width="1256"/></picture><div><span style="align-content:center;opacity:0.8">▲ The RBA remains optimistic that home investment will remain high in 2022 as Covid-delayed construction projects are completed.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Labour availability was also a key concern in the NAB Survey, second only to construction costs, and affecting WA and NSW the most. </p><p>The RBA reported that firms in the construction section were struggling to find labour, particularly for specific high-demand skills. </p><p>It also predicts this could ease as international borders reopen to skilled migrants despite some firms reporting higher staff turnover than usual as workers move for higher pay. </p><p>The RBA predicts that by mid-2022 the strong demand for labour will result in a lower unemployment rate and a decreasing underemployment rate, with an increase in hours worked for existing staff. </p><p>It is says Omicron will disrupt labour supply albeit temporarily and that employment growth will rise before levelling out in 2023.</p><p>The RBA’s predictions, particularly around how a decrease in unemployment and growth in wages may increase inflation in 2022, were deemed too conservative by the Commonwealth Bank of Australia. </p><p>“The RBA has significantly upgraded their forecast profile for underlying inflation, but it still looks conservative over 2022 relative to our forecasts,” the CBA said.</p><p>“The RBA has downwardly revised their profile for the unemployment rate and now forecast it to be 3.75 per cent at both the end of 2022 and 2023.”</p><p>The CBA now expects the RBA will raise the cash rate in August of this year.</p></div></div></div></div></div>

Property professionals are most concerned about construction costs and labour shortages but the RBA is more optimistic about 2022...

Corelogic House Index

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>For eight consecutive months Melbourne and Sydney house prices have grown, yet market analysts warn that affordability and a potential pandemic are a cause for concern.</p><p>Nationally, property values recorded a 1.2 per cent lift in February across the combined capital cities, according to the latest figures from Corelogic&#x27;s monthly home value index.</p><p>Values grew by 1.2 per cent in Melbourne and 1.7 per cent in Sydney over the month of February, following a peak-to-trough decline of 14.9 per cent in Sydney and 11.1 per cent over the duration of the <a href="https://theurbandeveloper.com/articles/is-the-downturn-over-house-prices-begin-to-rise">housing downturn</a>.</p><p>House prices rebounded by 10.9 per cent in Sydney and 10.7 per cent in Melbourne for the 12 months to February, with median values now at $872,934 and $689,088 respectively.</p><p>Despite posting the most rapid recovery trend among the capitals, Sydney housing values remain 3.7 per cent below the 2017 peak.</p><p>Price rises in the other capital cities have been less pronounced. Brisbane saw a moderate gain of 0.6 per cent, with Hobart and Canberra both seeing 0.8 per cent growth.</p><p>“At the current run rate of growth, the national index is likely to reach a new nominal high over the next two months,” Corelogic head of research Tim Lawless said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th>City</th><th>Month</th><th>Quarter</th><th>Annual</th><th>Median value</th></tr></thead><tbody><tr><th>National</th><th>▲1.1%</th><th>▲3.0%</th><th>▲6.1%</th><th>$549,918</th></tr><tr><th>Sydney</th><th>▲1.7%</th><th>▲4.6%</th><th>▲10.7%</th><th>$872,934</th></tr><tr><th>Melbourne</th><th>▲1.2%</th><th>▲3.9%</th><th>▲10.7%</th><th>$689,088</th></tr><tr><th>Brisbane</th><th>▲0.6%</th><th>▲1.7%</th><th>▲1.9%</th><th>$503,265</th></tr><tr><th>Adelaide</th><th>▲0.1%</th><th>▲0.8%</th><th>▲0.4%</th><th>$439,453</th></tr><tr><th>Perth</th><th>▲0.3%</th><th>▲0.4%</th><th>▼-4.0%</th><th>$442,691</th></tr><tr><th>Hobart</th><th>▲0.8%</th><th>▲1.9%</th><th>▲5.0%</th><th>$488,968</th></tr><tr><th>Darwin</th><th>▼-1.4%</th><th>▼-1.8%</th><th>▼-7.8%</th><th>$386,345</th></tr><tr><th>Canberra</th><th>▲0.8%</th><th>▲1.1%</th><th>▲4.1%</th><th>$631,862</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sub>^ Change in dwelling values to 29 February 2020. Source: Corelogic</sub></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The strongest value gains continue to be recorded across properties in the upper quartile value range lifting by 1.6 per cent in February compared with 0.4 per cent in value across the lower quartile.</p><p>Sydney’s top quartile market has recorded a 13.3 per cent lift in dwelling values over the past twelve months compared with a 5.6 per cent rise across the lower quartile. </p><p>Similarly, Melbourne&#x27;s top quartile is up 14.2 per cent in value over the past year compared with a 7.6 per cent rise in lower quartile values.</p><p>Rental growth, which remains generally weak across most markets, were up four tenths of a percent in February, taking the annual change in rental rates to 1.4 per cent. </p><p>Corelogic forecast that the market momentum was unlikely to continue as sluggish pace of household income coupled with rising  stock levels likely hindering affordability.</p><p>The <a href="https://theurbandeveloper.com/articles/coronavirus-construction-supply-chain-impact">coronavirus outbreak</a> could also be determining factor that impacts the market over coming months, Commonwealth Bank senior economist Gareth Aird warned, pointing to the possible damage to consumer confidence and the flow-on effects this can have to different industries.</p><p>“The potential fallout from COVID‑19 on economic activity means that any concerns around briskly rising house prices will be swept aside in near term monetary policy decisions.” </p><p>Analysts warned that while demand remained insulated from a downturn in foreign buyers, the economic impact on key export sectors such as education, tourism and commodities is likely to result in weaker economic conditions and lower consumer sentiment. </p><p>Capital Economics senior economist Marcel Thieliant said that auction clearance rates, available until 23 February, fell from 77 per cent in December to 69 per cent in February, allowing for seasonal factors. </p><p>“That could be a sign that the outbreak of the disease has started to tend demand. </p><p>“However, the continued strength in house prices suggests that the Reserve Bank of Australia won’t be as eager to cut rates as many are anticipating. </p><p>“We still expect the bank to wait until April before lowering interest rates any further.” </p></div></div></div></div></div>

    For an eight consecutive month Melbourne and Sydney house prices have grown.

375c58b4-28e0-474f-a007-c1cde2fbee9a

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Australia has had almost 30 years of uninterrupted growth, but the economy is likely to suffer its biggest downturn since the 1930s.  </p><p>The Reserve Bank of Australia has warned that the coronavirus pandemic could hit economic growth by up to 10 per cent over the first half of 2020, with most of this decline taking place in the June quarter. </p><p>“National output is likely to fall by around 10 per cent over the first half of 2020, with most of this decline taking place in the June quarter,” RBA governor Philip Lowe said on Tuesday. </p><p>“The unemployment rate is likely to be around 10 per cent by June, although I am hopeful it might be lower than this if businesses are able to retain their employees on lower hours.” </p><p>Total hours worked in Australia are likely to decline by around 20 per cent over the first half of this year, Lowe maintained confidence the economy would “bounce back” on the other side of Covid-19.</p><p>“Inevitably, the timing and pace of this recovery depend upon how long we need to restrict our economic activities, which in turn depends on how effectively we contain the virus,” Lowe said.</p><p>Grattan Institute research <a href="https://theurbandeveloper.com/articles/charts-show-coronavirus-pushing-up-to-a-quarter-of-the-workforce-out-of-work">estimates</a> that Australia’s unemployment rate could rise to between 10 and 15 per cent due to the Covid-19 related shutdown, with the latter figure the highest since the great depression in the 1930s.</p><p>“We calculate that between 14 and 26 per cent of Australian workers—1.9-to-3.4 million people—could be out of work in the coming weeks as a result of spatial distancing measures to contain the spread of Covid-19, if they aren’t already,” Grattan analysis by Brendan Coates, Matt Cowgill, Will Mackey and Tony Chen says. </p><p>“The longer this downturn goes, and the worse it gets, the less likely the labour market and the broader economy can spring back afterwards.”</p><p>Related: <a href="https://theurbandeveloper.com/articles/wage-subsidy-loan-deferrals">Wage Subsidy, Loan Deferrals Improve Outlook</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8f38f927-7986-49a7-94ea-81d7048f9dc8.png" width="1664"/></picture><div><span style="align-content:left;opacity:0.8">▲ More firms have seen demand fall than have been directly affected by the shutdown, Grattan Institute</span><span style="float:right;opacity:0.8">Grattan Institute</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The RBA governor said that the twin health and economic emergencies would “cast a shadow over our economy for some time to come”, but that if the restrictions could be lifted more quickly, with the virus being contained, a “stronger recovery could be expected”. </p><p>“Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual.”</p><p>Lowe said that if Covid-19 restrictions were lessened by mid-year, and are mostly removed by late in the year, except for the ban on international travel, the RBA could expect the economy to begin its “bounce back” in the September quarter, with GDP growth of 6 per cent to 7 per cent in 2021 after a fall around 6 per cent this year. </p><p>Lowe added that the unemployment rate would remain above six per cent “over the next couple of years” with wage growth expected to decline to below two per cent, and inflation is expected to remain below two per cent over the next couple of years.</p><h2><strong>‘Cheaper to service a mortgage’, Australia’s housing market</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>As Covid-19 hits all major economies simultaneously, what is different about this down turn from those Australia has seen before is a result of an enforced shutdown and not a crisis from a bust after a boom, AMP Capital chief economist Shane Oliver has said.</p><p>“It was not caused by anything fundamental in the Australian economy.”  </p><p>“Because of that, I am hopeful that once the virus is under control, we can recover and reach a more normal functioning in a quicker way than we have before.”</p><p>Amid the economic uncertainty, Oliver says it&#x27;s worth highlighting the potential opportunities for investors prepared to take a long-term view.</p><p>“For one, interest rates will be lower, the official cash rate is currently sitting at the all-time low of 0.25 per cent. This will mean it’s cheaper to service a mortgage,” Oliver said. </p><p>“The residential property market is also likely to take a <a href="https://theurbandeveloper.com/articles/house-prices-commsec">hit</a>, which could provide lower entry points for people who have struggled—particularly in cities like Sydney and Melbourne—with affordability.”</p><p>Last week, UBS<a href="https://theurbandeveloper.com/articles/stimulus-not-enough-to-offset-house-price-falls-ubs-"> revised</a> its forecasts to a decline of at least 10 per cent in house prices over the coming year.</p><p>The<a href="https://theurbandeveloper.com/articles/charts-show-coronavirus-pushing-up-to-a-quarter-of-the-workforce-out-of-work"> Covid-19 induced economic crisis</a> is expected to hit more than half of all workers in the hospitality industry, according to Grattan research, along with lower-income workers twice as likely as high-income earners to be out of work, and younger Australians and women expected to be impacted as a result of working in occupations most affected by the response to Covid-19.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/f2a51f68-b48a-4681-9009-36566ea903af.png" width="1728"/></picture><div><span style="align-content:left;opacity:0.8">▲ The IMF has forecast Australia&#x27;s economy will face its worst year since the great depression.</span><span style="float:right;opacity:0.8">Grattan Institute</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Global recession and Australia</strong></h2><p>The International Monetary Fund <a href="https://theurbandeveloper.com/articles/stimulus-not-enough-to-offset-house-price-falls-ubs-">forecasts</a> a 6.7 per cent downturn for Australia’s economy, followed by a rebound in 2021 of 6.1 per cent, as of its mid-April update.</p><p>The IMF also forecasts the global economy to contract by 4.2 per cent in 2020, and grow by 4.6 per cent next year.</p><p>The OECD has forecast that direct economic impacts of shutdowns will wipe out between 20 and 30 per cent of economic activity in most advanced economies, roughly 2 percentage points of annual GDP for each month, with world trade to fall by 11 per cent over the 2020 calendar year.</p></div></div></div></div></div>

Australia’s economy is likely to suffer its biggest contraction since the 1930s...

Philip Lowe RBA

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The Reserve Bank of Australia has reduced the official cash rate from 0.5 per cent to a historic low of 0.25 per cent in reaction to the growing <a href="https://theurbandeveloper.com/articles/coronavirus-stimulus">coronavirus crisis</a>.</p><p>The rate cut, the first outside of an ordinary monthly meeting since 1997, has been brought forward by the alarming <a href="https://theurbandeveloper.com/articles/discretionary-retail-hurts-as-stockpiling-benefits-supermarkets-">deterioration in Australia&#x27;s economy</a>, which has seen the dollar plunge to its lowest level since October 2002.</p><p>In an attempt to cushion the blow of the coronavirus pandemic, the RBA stated it would not lift the cash rate until progress was being made “towards full employment” and when the body was confident inflation would be “sustainably within the 2–3 per cent target band”.</p><p>Governor Philip Lowe said the bank would now launch into its first-ever quantitative easing in a bid to boost cash supply and encourage lending and investment.</p><p>The RBA will now buy Australian government bonds in the secondary market with a target yield on three-year bonds of about 0.25 per cent—well below the current yield of 0.47 per cent.</p><p>The RBA will also provide a $90 billion term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.</p><p>The RBA said the federal government had developed a “complementary” support program for non-bank lenders, small banks, and the securitisation market.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><iframe sandbox="allow-forms allow-scripts allow-pointer-lock allow-same-origin allow-top-navigation allow-presentation" class="embed-responsive-item" allowfullscreen="" frameBorder="0" style="max-width:574px" width="100%" height="300px" src="https://twitframe.com/show?url=https://twitter.com/RBAInfo/status/1240480672759889920"></iframe></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“Undeniably, what we are facing today is a very serious situation but it’s also something that’s temporary,” Lowe said. </p><p>“As we deal with it as best we can, we also need to look to the other side when things do recover.</p><p>“We are expecting a major hit to economic activity and incomes in Australia that will last for a number of months.</p><p>“We’re also expecting significant job losses.</p><p>“The timing and strength of that recovery will depend upon how successful we are as a nation in building that bridge to the other side.” </p><p>Lowe said Australia&#x27;s financial system was “resilient” and “well placed to deal with the effects of the coronavirus”.</p><p>Capital Economics senior economist Marcel Thieliant projects the public health crisis, which has spilled over into economies of every nation, would continue to cause the nation&#x27;s economy to nosedive.</p><p>“We now expect GDP to fall by 6 per cent in Q2 and 2 per cent across 2020 as the coronavirus outbreak disrupts economic activity across a wide range of industries.”</p><p>“That will result in a surge in the unemployment rate and will push underlying inflation further below the Bank’s 2-3 per cent target.”</p><p>ANZ economists mirror the outlook, warning the economy could contract by as much as two per cent in the June quarter, risking a rise in the jobless rate to almost eight per cent from around five per cent now.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/e387afb6-8ed2-421b-8312-2fb3194624cd.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ The RBA had the cash rate at 1.5 per cent at last year&#x27;s May federal election but started cutting last June in a bid to drive down unemployment and lift wages.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The Commonwealth Bank, the first of the big four to move after the RBA&#x27;s announcement, has reacted to the announcement by reducing rates on small business loans by 100 basis points.</p><p>“We want to ensure that we help keep small businesses open so that they can keep Australians employed, and that we do everything we can to support households and older Australians,” CBA chief executive Matt Comyn said.</p><p>CBA also said each of its one, two and three-year fixed home loan rates by 70 basis points to an all-time low 2.29 per cent as well as raising the rate on term deposits by 70 basis points to 1.7 per cent. </p><p>Shortly after the RBA’s decision the federal government announced an investment of up to $15 billion to enable smaller lenders to continue supporting Australian consumers and small businesses.</p><p>The <a href="https://theurbandeveloper.com/articles/coronavirus-property-markets">property sector</a> looks set for further misery after a slight reprieve with investment bank UBS forecasting house prices could drop by up to 20 per cent in the worst case scenario were the pandemic to continue through to September. </p><p>UBS said if its “moderate” scenario happens where infection rates peak in May, house prices will rise by 5 per cent.</p><p>Industry data provider Corelogic shared the ominous outlook stating that despite the central bank and federal governments measures helping to stabilise and capitalise credit markets, the ongoing economic weakness and uncertainty would likely keep consumer spirits low.</p><p>“Under normal circumstances, such an extraordinary move from the Reserve Bank might be greeted with renewed optimism towards housing market activity.</p><p>“However the current situation of extreme uncertainty and economic fragility makes it difficult to expect housing market activity to lift against the historically low cost of debt.</p><p>“As the coronavirus pandemic broadens, and the probability of an Australian recession increases, consumer confidence is trending lower from an already weak position.”  </p></div></div></div></div></div>

The Reserve Bank of Australia has reduced the official cash rate from 0.5 per cent to a historic low of 0.25 per cent.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The residential property market in Australia continues to be challenged by social distancing measures and weaker economic activity, with preliminary clearance rates falling to 29.3 per cent during the Easter long weekend.</p><p>Corelogic figures recorded a very subdued 636 homes scheduled for auction across the nation’s combined capital cities—a figure which, even in the midst of the coronavirus downturn, isn&#x27;t in itself unusual given that the Easter weekend is traditionally one of the quietest weeks of the year.</p><p>But the preliminary auction clearance rate of 29.3 per cent is the lowest preliminary result recorded since Corelogic commenced auction reporting in 2008, dragged down by a withdrawal rate of 57 per cent as the market continues to feel the impact of coronavirus containment measures banning on-site auctions and viewings.</p><p>And the preliminary clearance rate—collected from 472 results so far—is likely to plunge even lower, and withdrawal rates higher, as more results are collated, according to Corelogic’s analysts.</p><p>“Looking forward, we are expecting the withdrawal rate to ease as fewer auctions are scheduled, with vendors preferring private treaty methods of sales, or preferring to defer their listing until some certainty returns to the market and economy.”</p><p>CoreLogic head of research Eliza Owen said that despite the short-term outlook, there was still cause for optimism.</p><p>“Looking ahead, the next few months will present an unprecedented challenge to the auction market and the housing market more broadly. </p><p>“However, once the virus is contained, property is looking increasingly better-placed for a recovery because of the high levels of monetary and fiscal <a href="https://theurbandeveloper.com/articles/coronavirus-delays-federal-budget-15bn-loans-to-businesses">stimulus </a>available.”</p><p><strong>Weekly clearance rates, combined capital cities</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/65bcbed4-8ebc-44e0-8759-d77825f810b3.png" width="1838"/></picture><div><span style="align-content:left;opacity:0.8">▲ Combined weekly auction clearance rates for all capital cities in April showing a preliminary rate of 29.3 per cent.</span><span style="float:right;opacity:0.8">Source: CoreLogic </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>For now, the monetary, fiscal and social <a href="https://theurbandeveloper.com/articles/coronavirus-eviction-moratorium">policies </a>rolled out by the federal and state governments may already be helping to <a href="https://theurbandeveloper.com/articles/new-fiscal-policies-shift-the-outlook-for-rental-housing">soften the blow</a> for the rental market, at least temporarily.</p><p>SQM data shows Australia’s residential rental vacancy rate remained stable at 2.0 per cent in March, with the total number of vacancies Australia-wide now at 67,371 vacant residential properties.</p><p>Most states recorded minor 0.1 per cent declines in vacancy rates, with the exception of Sydney, Melbourne and Darwin, which were stable.</p><p>SQM managing director Louis Christopher said the minor decline in most capital cities’ vacancy rates for March was somewhat surprising given the uncertainty around the economy. </p><p>“With job losses, a freeze in migration and an expected sharp rise in short-term accommodation vacancies,we are likely to record significant increases in rental vacancy rates as 2020 progresses. </p><p>“Let’s keep in mind our methodology requires a property to be advertised for three weeks or longer before we regard it as unoccupied,” Christopher said.</p><p>Capital city asking rents decreased by 3.2 per cent for houses and 2.9 per cent for units for the week ending April 12, with asking rents of $544 per week for houses and $428 per week for units.  </p><p>“I also note the 3.2 per cent drop in asking rents for houses over the month, which may well be as a result of many short-term accommodation dwellings <a href="https://theurbandeveloper.com/articles/domain-rents-listings-increase">entering </a>into the longer-term leasing market, and overall, a sign of things to come,” Christopher said.</p><p>Sydney, Melbourne, Brisbane and Hobart all recorded decreases in asking rents for both houses and units over the month. </p><p>Perth and Adelaide were the only capital cities to record rent increases for both houses and units, with asking prices in Perth increasing by 1.9 per cent for houses and 0.8 per cent for units. </p><p>Adelaide recorded a 0.3 per cent increase for houses and 1.4 per cent for units.</p><p>Canberra and Darwin recorded increases in house asking rents with Canberra increasing by 2.6 per cent and Darwin 0.1 per cent, however, both cities had declines in unit prices over the month—Canberra  by 0.1 per cent and Darwin by 0.6 per cent. </p><p>While the impact of the Covid-19 pandemic on the residential property market remains <a href="https://theurbandeveloper.com/articles/coronavirus-impact-property-unclear-unemployment-rate-10pc">unclear</a>, the Reserve Bank&#x27;s April Financial Stability Review has pointed to Australia&#x27;s &quot;strong starting position&quot; for dealing with what&#x27;s in store.</p></div></div></div></div></div>

Clearance rates fell to a record low of 29.3 per cent during Easter as residential property markets continue to feel the impact of Covid-19 ...

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Unemployment is expected to rise to its highest rate in almost thirty years, with new figures forecasting the rate to increase from 5.1 per cent to 10 per cent in the June quarter. </p><p>The latest treasury figures, released Monday night, said Australia’s unemployment rate could hit double digits for the first time since the “recession we had to have” of the early nineties. </p><p>Australia’s peak unemployment rate reached 11.2 per cent in 1992. It has hovered around 5 per cent and 6 per cent in recent years. And currently sits at 5.1 per cent.</p><p>While economic uncertainty, job insecurity and increasing restriction measures are likely to cause declines in real estate activity across the sector, the Reserve Bank of Australia said it was unclear how Covid-19 would impact property prices.  </p><h2><strong>Coronavirus impact on property market ‘unclear’</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Last week the Reserve Bank held its rate at 0.25 per cent. </p><p>In the central bank’s Financial Stability Review, it noted that Australia’s financial system enters this challenging period “in a strong starting position” with capital levels high, banks&#x27; liquidity position “improving considerably” in recent times, and noting that most households “now have substantial equity in their homes”.</p><p>“The economic downturn, uncertainty and social distancing are likely to result in very little turnover in the housing market,” the RBA said in the April update review. </p><p>“It remains unclear how this will affect residential property prices.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/50c9b3d5-e2a5-4781-8b9e-c858ab0461d9.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ The coronavirus-induced downturn is expected to see Australia&#x27;s unemployment rate nearly double by mid-year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>SQM’s managing director Louis Christopher expects the next month to be a telling time for the property market. </p><p>Last week SQM <a href="https://theurbandeveloper.com/articles/-pandemic-sees-property-listings-sqm">forecast</a> residential prices could drop by 30 per cent from recent highs in one of its bleaker scenarios, with the most overvalued cities — Sydney and Melbourne — hit the hardest.</p><p>“The next 30 days will likely tell the story. It is very hard to judge it,” Christopher said. </p><p>Preliminary auction clearance rates <a href="https://theurbandeveloper.com/articles/coronavirus-house-sales-auctions">fell below</a> 30 per cent over the Easter long weekend according to CoreLogic. Withdrawn auctions increased to comprise 57 per cent of all reported results. </p><p>While Australia’s house prices remained <a href="https://theurbandeveloper.com/articles/property-market-plunge-coronavirus-corelogic">positive</a> through March, recording a 0.7 per cent rise, CoreLogic says recent market trends have become <a href="https://theurbandeveloper.com/articles/property-market-coronavirus">less</a> relevant as we move into unprecedented uncertainty.</p><p>Treasurer Josh Frydenberg described the economic shock facing the global economy from Covid-19 as “far more significant than what was seen during the global financial crisis over a decade ago”.</p><p>“The exceptional measures taken to contain Covid-19 are having a major effect on economic activity and the global financial system,” he said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/2771d0e0-9401-4ce1-82d2-fdada8938f4e.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Frydenberg confirmed that the 10 per cent unemployment rate is expected when the figures for the June quarter are released. The unemployment rate currently sits at 5.1 per cent. </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>In its update, Treasury forecast that the unemployment rate would increase to 15 per cent, “in the absence” of the Job Keeper package, the $1500 fortnightly payment to workers of covid-19 impacted businesses.</p><p>The $130 billion <a href="https://theurbandeveloper.com/articles/wage-subsidy-loan-deferrals">package</a> was passed in parliament last week. </p><p>More than 800,000 businesses have applied for the payment program, to date. </p></div></div></div></div></div>

Unemployment is expected to rise with new figures forecasting the rate to increase from 5.1 per cent to 10 per cent

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The number of homeowners behind on mortgages have climbed back to 2010 levels, although the Reserve Bank says this does not pose a risk to the financial system.</p><p>In an address at a property industry summit, the RBA’s head of financial stability Jonathan Kearns said weak income growth, housing price falls and rising unemployment in certain areas have contributed to the rise in mortgage arrears.  </p><p>“The share of banks&#x27; housing loans in arrears is now back around the level reached in 2010, the highest it has been for many years,” Kearns said.</p><p>“But arrears are still well below the level reached in the early 1990s recession.”</p><p>“Housing arrears have risen but by no means to a level that poses a risk to financial stability,” Kearns said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ccd1c879-ba9b-4fa9-be5e-327eefda02aa.png" width="1182"/></picture><div><span style="align-content:center;opacity:0.8">RBA says the rate of housing loan arrears is rising. Housing loans are 40 per cent of banks&#x27; assets. </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Moody’s Investors Service this week said it expects <a href="https://theurbandeveloper.com/articles/moderate-house-price-declines-for-remainder-of-2019-moodys-says">mortgage delinquencies to rise moderately</a> in the coming quarters.</p><p>A number of interest-only mortgages are due to convert to principal and interest loans by the end of 2020, which Moody&#x27;s expects will cause delinquencies as borrowers are burdened with higher monthly repayments.</p><p>While personal misfortune, such as ill health, a relationship breakdown or death, unrelated factors to economic conditions, are often related to loan arrears, weak economic conditions drive cyclical upswings.</p><p>“What we can see across Australia is a clear pattern of more loans going into arrears in locations where the unemployment rate is higher,” Kearns said. </p><p>Western Australia and parts of regional Queensland has seen the unemployment rate increase and income growth slow, due to the end of the mining boom, with certain areas subsequently recording larger increases in arrears.</p><p>“In Western Australia the arrears rate is now around double the rate in the rest of the country,” Kearns said.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/85ceb8c8-4e6b-45c7-bb54-e06cf6659fdd.png" width="1166"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>While the increase in arrears level is notable, Kearns said the rate of arrears in Australia is still relatively low internationally, and lower than in many other advanced economies. </p><p>The proportion of those behind on loans sits around 1 per cent. </p><p>“Another way to look at the arrears rate in Australia is to note that over 99 per cent of housing loans are on, or ahead of, schedule,” he said. </p><p>While the nation&#x27;s economic outlook “remains reasonable” and household income growth is expected to pick up, Kearns said the arrears rate could continue to “edge higher for a bit longer”.</p><p>“But with overall strong lending standards, so long as unemployment remains low, arrears rates should not rise to levels that pose a risk to the financial system or cause great harm to the household sector.”</p><p>The latest research carried out by Curtin University&#x27;s Rachel Ong and RMIT University&#x27;s Gavin Wood reveals a <a href="https://theconversation.com/more-people-are-retiring-with-high-mortgage-debts-the-implications-are-huge-115134">rising number of mature age Australians</a> are carrying mortgage debt into retirement.</p><p>The research showed the proportion owing money on mortgages for home owners aged 55 to 64 years of age increased from 14 per cent to 47 per cent between 1990 and 2015.</p></div></div></div></div></div>

The number of homeowners behind on mortgages have climbed back to 2010 levels, although are not at a level to pose risk to the financial system: RBA

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Housing credit has slowed to its weakest level in almost 35 years according to the Reserve Bank’s latest data.</strong></p><p>The RBA&#x27;s latest issue of financial aggregates for January 2019 reveals housing credit increased by 0.2 per cent over the month, marking the smallest monthly increase since credit fell by 0.4 per cent in July 1984.</p><p>“To put this in context,” explains Corelogic research analyst Cameron Kusher, “credit growth was not as anaemic as it was in January 2019 any time during the early 1990s recession or during the GFC”.  </p><p>For the 12 months to January this year, housing credit increased by 4.4 per cent - the slowest annual rate of growth on record.</p><p>Kusher says credit to owner-occupiers increased 0.3 per cent over the months while investor credit expanded 0.1 per cent.</p><p>On an annual basis, owner occupier credit increased by 6.2 per cent representing its slowest annual growth since September 2015, while investor credit expanded at an historically low rate of 1 per cent.</p><p>While housing finance data shows there are fewer mortgages being approved, Kusher believes another key contributor to slowing credit growth is the fact that many investors are coming to full-term with their interest-only mortgages. </p><p>“Previously, these borrowers weren’t paying off the principal on their mortgage, now that they are, coupled with far less investor mortgage demand, they are paying back their principal and fewer new investor mortgage applications are occurring which in-turn contributes to the ongoing slowing of investor credit growth,” Kusher said.</p><p>Analysis by investment bank Morgan Stanley and AlphaWise this month revealed a<a href="https://theurbandeveloper.com/articles/up-to-650000-interest-only-borrowers-trapped">round 650,000 borrowers, with loans of up to $230 billion were “trapped” i</a>n interest-only loans.</p><p>Those “trapped interest-only” borrowers make up 11 per cent of all mortgage holders, who could struggle to refinance once their interest only period ends forcing many to sell in an already softening property market. </p><p>The RBA has kept<a href="https://theurbandeveloper.com/articles/falling-home-prices-could-lead-to-slower-economic-growth-rba"> rates at a record-low 1.5 per cent since August 2016</a>.  </p><p>Related: <a href="https://theurbandeveloper.com/articles/australias-property-market-will-be-shaped-by-these-factors">What to Expect from the Property Market in 2019: Experts Weigh In</a></p></div></div></div>

Home lending has slowed to its weakest level since July 1984

RESERVE BANK OF AUSTRALIA