The facts on affordability and housing stress- Pete Wargent

We’re hearing a lot about housing affordability at the moment, largely because first homebuyers are struggling to save deposits for mortgages.

The Reserve Bank spends a fair amount of time charting issues related to housing stress.

Non-performing housing loans into 2013 as compared to the UK, US, Canada, the Eurozone and the rest of Europe:

graph-1.16

Savings levels in Australia remain elevated at around 10% of household disposable income.

Housing equity withdrawals, which became popular in Australia after the turn of the century, have receded.

sp-so-230413-graph4

Repayments on new housing loans in 2013 are low in the current low interest rate environment.

Since the RBA prepared this chart, the cash rate has been cut twice further to only 2.50%., thus repayments on new housing loans are at around a fifth of household disposable income.

sp-so-230413-graph11-small

Remember that interest rates are at generational lows.

While most economists expect this to continue through 2014, history shows that interest rates will revert higher at some point in the future.

Local shares slipped by 2.5% last week. Expecting a bounce today following stronger US data last week where unemployment fell to 7.0%, the lowest level in 5 years.

The XJO 5 year chart shows the broad recovery since the financial crisis which has been greatly enjoyed by those employing a long-run averaging strategy.

imageChart.axd 



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About

is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog


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