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Housing crisis looms: Fujitsu
3 March 2009
Australia could be heading into its own US-style housing crisis, warns Fujitsu Consulting.
The consulting group says first homebuyers enticed into entering the property market by government incentives and low interest rates could experience stress later because interest rates will rise from their current low levels, unemployment will rise and house prices are likely to slip.
Many of the deals being written in the first-time buyer segment of the market are at high LVRs so there is little leeway, it warned.
"The significant incentives for first-time buyers are creating demand pressures there, but there is a significant risk building when rates turn up, and house prices fall. We are mirroring the US situation before the financial crisis three years ago," said Martin North, managing consulting director and executive general manager.
Fujitsu is expecting mortgage stress to lift to 1.2 million households in September 2009.
"This will more than offset any upside offered by the increased first-time buyers grants or further rate cuts and we expect to see house prices drift lower over the coming months."
Fujitsu's Stress-O-Meter found that in February mortgage stress fell by 1.5% from December with 625,000 households experiencing some pain, compared to a peak of 900,000 households in August 2008.
However, there was a 1.5% rise in those facing a potential sale or foreclosure due to rising unemployment and reduced part-time hours in the SME sector. Some 164,000 are still at risk of having to sell or lose their homes.
"We are seeing some significant changes in the mortgage stress landscape," North said.
"Compared with June 2008, 32% of households are now less concerned about the costs of borrowing and 15% are less concerned about the costs of living, thanks to falling interest rates and the government payments. But on the flipside, 15% are more concerned about unemployment, 15% are more concerned that their investments are not performing, and 5% have directly felt the impact of redundancy. The net effect is relief for younger families, but considerable increases in stress amongst middle income and more affluent families."