James Kirby, Wealth Editor of the Australian raised some interesting points recently, under the heading “The four big housing market lies”. It’s worth reading the Australian just for that commentary alone.
He points out that Australians are able to pay their mortgages each month because interest rates are so low. When rates move higher, as they will, there will be a problem.
Most deposits are 20%, which makes saving for a deposit just about impossible, without help from mum and dad. If that help is available.
Nearly 40% of the market is in interest-only loans. They rely on price appreciation to make money. Any change in conditions – negative gearing, tax deductions, rising interest rates, China shutting the gate, drop in house prices – and the overall market will shudder, disrupting other parts of the economy.
Anecdotally, Chinese housing investment is a subject that is regularly and quietly discussed in offices, living rooms and at barbecues when the subject of who bought the house at the end of the street comes up…”a nice Chinese couple. They outbid everybody.”
And there will continue to be Chinese investment in Australian capital cities for as long as Chinese and Australian regulators allow it. Blocking the dreams of young Australians to own anything in the city.