Here are 9 charts that will make you worry about how Australians are funding their property purchases and what will happen when interest rates start to rise.
All data has been extracted from the RBA statistical tables
1. Sydney Property Prices vs Wage Growth
Wages growth is down, so how can property prices be up?
2. Sydney Property Prices vs Household Debt
Instead of deleveraging post the GFC, we have taken on more debt and property prices have rallied as a result:
4. Sydney Property Prices vs Mortgage Rates
The variable interest rate is dropping, so property prices have been going up:
3. Sydney Property Prices vs Interest Payments
Property buyers are able to use more debt, because interest rates are lower.
5. Interest Only Loans
Interest only loans now represent around 23% of owner-occupier lending and 64% of investor lending:
6. Interest Rates at Record Lows
Which is even more concerning considering people are going interest only, when interest rates are at record lows:
7. Interest Payments vs Household Disposable Income
Mortgage holders are paying less interest, so they feel they have more money to spend:
8. Sydney Property Prices vs Household Debt to Income
The housing boom is funded by debt as opposed to income increases:
9. Sydney Property Prices vs Household Savings Ratio
It appears people were saving post the GFC but the lure of participating in the rising property market has proved too tempting:
- It appears investors are herding into property as the default investment option
- To fund property purchases investors have been taking on more debt
- Wage growth has been low, but property prices have been buoyant because debt is cheaper
- Given the record levels of debt, it is concerning to think what will happen when rates do start to go up
This blog provides links to third party sites, aimed at helping you gather the information required to make an informed decision – we may receive payment of a commission or other fee for these referrals.
The Wealth Guy