Property in Australia

Property in Australia less risky than some experts suggest

Property in Australia has been remarkably resilient to the recent global financial crisis.  Indeed, in early 2011, US consultants Demographia labelled Australia as the most expensive property market in the world, with homes costing 6.1 times the average annual income.

Many experts have therefore predicted that it can only be a matter of time before the Australian Property market crashes.  However, thanks to strict lending practices and comfortable affordability, a leading financial journalist believes that property in Australia is more stable than foreign experts would have you believe.

Property in Australia unlikely to tumble in value

John Beveridge, writing in the Herald Sun, says that ‘by now Australians are totally accustomed to visiting gurus telling us our houses are about to crash in value.’  The journalist refers to Harry Dent, an American economic forecaster who believes that the world is about to undergo a second crisis and this time Australian Property prices will be taken ‘all the way back to where they were a decade or more ago.’

However, Beveridge gives various reasons why he believes that a property crash in Australia is unlikely and that buying property in Australia is still a good deal.

Firstly, lending practices in Australia have been ‘more rigorous than many offshore markets’ meaning that there are less cases of sub-prime borrowers being enticed into the mortgage market when they have little hope of repaying their debts.

 In addition, Beveridge points to the ‘higher quality of Australia's housing stock, with renovations and extensions naturally adding value.’

Property in Australia remains affordable

The journalist also believes that the affordability of home loans in Australia is more comfortable than in other countries.  Just 2 per cent of outstanding mortgages are to borrowers with a ‘loan to value’ in excess of 90 per cent and who use more than half their income to service their mortgage.

Beveridge says: “About three-quarters of our household debt is held by the top 40 per cent of income earners with substantial assets. Australians are also commonly ahead on their mortgage payments and have built up savings in recent years as a bulwark against adverse economic events.”