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Why is the Federal Government Keeping Such a Close Eye on the Housing Market?

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Concerns about household debt levels and the downturn of Chinese investing across Australia has prompted the federal government to focus more energy on the housing market. Mortgage brokers in Sydney are aware of these growing concerns and know why the government is keeping an eye on the housing market.

Recently, John Fraser, keynote speaker at the Stockbrokers and Financial Advisers Conference in Sydney, said that household debt has exponentially increased faster than household incomes in recent years.

The increase in debt could cause issues with borrowing and credit, especially under the new, tighter credit rules. Mortgage brokers know how to approach these concerns and can help borrowers address them, and assist buyers in paying off their mortgages faster. Philip Lowe, RBA governor, is seeking to gather data from banks related to the debt-to-income ratio of current borrowers. They are seeking to prevent unpaid loans and other debt.

The recent reduction in Chinese real estate investing across Australia threatens to affect the country’s economy, which only adds pressure to the issue of increased household debt in general. In general, foreign residential housing investments have fallen from 40,000 in 2015 and 2016 to 15,000 in 2016 and 2017. Strategies are being implemented to reduce the outflow of the capital from China’s real estate investments and maintain economic stability.

The interest in Chinese business investments remains strong in light of tighter credit rules across banking institutions. Moody recently lowered the credit rating from A1 to Aa3 for China hoping the financial strength of China may somewhat erode over the next few years. This is the first downgrade for China since 1989, and was virtually ignored by their government’s finance ministry.

Any concerns about paying off your mortgage and reducing your household debt can be addressed by talking to financial experts and reliable Mortgage Brokers in Sydney.

Don’t Let the Exaggerated Oversupply Commentary Prevent Investing

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A Look at Australia’s Housing Construction Cycle featured a recent research report by NAB Economics which stated that while the apartment construction pipeline is two times higher than historical norms across most states, most of the commentary related to these circumstances is “overly alarmist.” This industry is known for self-regulating its supply. Mortgage brokers in Sydney are following NAB predictions and forecasts in the coming two years, which point out the following.

NAB says, “Much has been made of emerging risks in the apartment market.” They also reported that some central business district apartment markets are already falling, but they believe this is mostly due to tougher credit rules, reduced construction capacity, and lower construction approvals, which diminish the rate of completed developments. Mortgage brokers can help with development loans in a variety of credit situations, which helps some borrowers get approved.

According to NAB, the apartment construction industry has demonstrated its ability to self-regulate supply in the past. This means there are likely some areas of the market that might experience excess supply, though lengthening the construction cycle often reduces risk of destabilsation in the market. The analysis from NAB shows the construction cycle could reach a peak sometime in 2018. The data analysed by NAB show that new projects could drop 13 per cent this year, 7 per cent in 2018, and 9 per cent by 2019.

NAB’s statistical models also predict that the large pipeline of current/ongoing projects will run down more slowly than the general commentary would suggest. NAB are forecasting a rise in dwelling construction of about 2 per cent in 2017, which may fall slightly to 1 per cent in 2018 and possibly rise to 3.5 per cent in 2019.

NAB states there are indicators that show the industry is already self-regulating dwelling supply. Approvals for construction have fallen from the peaks, but have not been as substantial as expected. There are signs of already approved projects taking longer to begin.

NAB predicts that we will most likely see longer construction cycles than previously believed. This will bring the industry’s peak level down, and help relieve concerns about oversupply.

Although prices for units have dropped a bit – and may appear unsteady – the above trends indicate that oversupply is unlikely.