<p data-end="211" data-start="96">National developer Time &amp; Place appears to have settled on a design for its long-anticipated Potts Point project.</p>

<p data-end="430" data-start="213">After several years of back and forth with local council and the NSW Government, the developer, which has spent close to a decade targeting the former The Chimes site on Macleay Street, has now progressed its plans.</p>

<p data-end="645" data-start="432">Following a concept design submission last year by SJB, Time &amp; Place has lodged a full State Significant Development Application with the NSW Government, this time for a scheme designed by Kerry Hill Architects.</p>

<p data-end="645" data-start="432"><img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="504d2a27-d65f-4227-8189-1e35e3376e62" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.38.24%E2%80%AFAM.png?VersionId=_XqFKATYHF30KnVByPxhaI9UBzmkmfn7" /></p>

<p data-end="801" data-start="647">The 16-storey proposal includes 44 apartments, 21 of which will be build-to-sell. These will comprise 19 three-bedroom apartments and two four-bedroom penthouses.</p>

<p data-end="984" data-start="803">More than 50 per cent of the development will be dedicated to affordable housing, with 23 one- and two-bedroom apartments delivered in line with the NSW Government’s Housing SEPP.</p>

<p data-end="1068" data-start="986">Kerry Hill Architects said the proposal is driven by a strong response to place.</p>

<p data-end="1224" data-start="1070">“Our proposal for a new residential building for Potts Point in Sydney is driven by a deep consideration of place,” the practice said in its submission.</p>

<p data-end="1630" data-start="1226">“This operates on multiple levels, including a landscape approach that reinstates endemic flora of the Sydney peninsula and provides a ground-floor garden for residents, reconnecting the site to its pre-European history. A brick podium further strengthens this relationship to context, integrating planting and fine bronze detailing that references the predominant material language of Macleay Street.”</p>

<p data-end="1898" data-start="1632">The three-level podium will be topped by a communal resident space, featuring a covered pool designed to receive direct afternoon sun in winter, a neighbouring reflection pool, dining and event areas oriented to maximise sunset views, and an outdoor exercise zone.</p>

<p data-end="1898" data-start="1632"><img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="8d3eedc1-babb-44a3-bd96-d8a42f3adf1f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.37.48%E2%80%AFAM.png?VersionId=Ii7.4dvqNatu5GQi6bhqNjAswrMB998." /></p>

<p data-end="2132" data-start="1900">The design also incorporates highly crafted shopfronts and a clearly defined residential entry to activate the street. Juliette balconies to the podium residences will provide passive surveillance and a strong sense of habitation.</p>

<p data-end="2225" data-start="2134">Above, the larger apartments are housed within a light-coloured masonry and bronze tower.</p>

<p data-end="2469" data-start="2227">“The tower steps back in a series of gently curved volumes that reference the rich Art Deco context of Macleay Street,” the architects said. “Carefully calibrated vertical fins frame the views while providing privacy and a sense of refuge.”</p>

<p><img alt="Time &amp; Place" data-entity-type="file" data-entity-uuid="6fab60f4-3140-4469-b47a-48c781e0a30b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%209.28.44%E2%80%AFAM.png?VersionId=e5XxrM3kzdASdKlcIACHAHbOSZhSKC9O" /></p>

<p>Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in South Melbourne.</p>

<p data-end="987" data-start="610">The developer has approval for The Burke, a mixed-use project in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>&nbsp;being delivered in partnership with Woolworths. The 60 apartments, positioned above a new Woolworths supermarket, are expected to launch in the coming months. Time &amp; Place is also progressing plans for the redevelopment of&nbsp;<a href="https://www.apartments.com.au/developments/northcote-vic-3070">Northcote</a>&nbsp;Plaza, and have recently submitted plans for a <a href="https://www.apartments.com.au/news/vic/time-place-unveils-plans-22-storey-south-melbourne-tower">22-storey tower</a>, another in South Melbourne.</p>

<p data-end="1377" data-start="989">In&nbsp;<a href="https://www.apartments.com.au/developments/sydney-nsw">Sydney</a>, the developer has two projects in Manly: Two Tides, which is currently under construction, and an ultra high-end building on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach. It is also continuing to work through the redevelopment of The Chimes building on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as Marlborough House, the redevelopment of the original David Jones warehouse building in&nbsp;<a href="https://www.apartments.com.au/developments/surry-hills-nsw-2010">Surry Hills</a>.</p>


Joel Robinson

First look: Time & Place settles on design for The Chimes, Potts Point redevelopment

<p><a href="https://www.apartments.com.au/developers/develotek">Develotek</a> is joining the likes of TOGA, Deicorp, and One Global Capital, betting on a boom in Five Dock ahead of the 2032 mooted opening of the Five Dock Metro Station.</p>

<p>Develotek, which is currently developing Bianca on the Drummoyne waterfront and has plans approved for a tower in Chatswood, has filed a State Significant Development Application for a <a href="https://www.apartments.com.au/new-apartments/79-81-queens-road-five-dock-nsw-2046">two-building project in the evolving Kings Bay precinct</a>.</p>

<p>The buildings, one more boutique just five storeys and the other 26 storeys, will rise from an 3,158 sqm site across&nbsp;79–81 Queens Road and 2–8 Spencer Street, will home 134 one-, two-, and three-bedroom apartments, above ground-floor retail and five basement levels of parking.</p>

<p>A key component of the proposal is the inclusion of 15 per cent of residential floor space as in-fill affordable housing, unlocking additional height and density under the Housing SEPP.</p>

<p><img alt="First Look: Develotek lodges State Significant shop top housing project in Five Dock precinct" data-entity-type="file" data-entity-uuid="3ee31bf7-75ba-4bc5-b190-49885193219f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium_2.png?VersionId=730UbrduuwK3C1sO28RHjiLPUPqXqjkh" /></p>

<p>Designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a>, the scheme adopts a podium-and-tower configuration, with a five-storey street wall along Queens Road transitioning to a 26-storey tower set deeper into the site. The ground plane prioritises activation and permeability, with retail frontages and a new through-site link connecting Queens Road to Spencer Street.</p>

<p>At the upper levels, the tower façade has been conceived using a modular system to support prefabrication and reduce construction waste, while improving build efficiency. The splayed form draws on the geometry of surrounding industrial rooftops, reinterpreting the area’s heritage in a contemporary expression while also helping to reduce solar heat gain to east and west-facing apartments.</p>

<p>“This project aspires to transform a former industrial site into a connected, resilient and people-focused urban community, grounded in Country, shaped by history, and designed to enrich everyday life within the evolving Kings Bay Precinct,” said John Walsh, Principal at Plus Studio.</p>

<p>The proposal reflects the broader transformation of the Kings Bay Precinct under the Parramatta Road Corridor Urban Transformation Strategy, marking a shift from its industrial past to a higher-density, mixed-use urban neighbourhood.</p>

<p><img alt="First Look: Develotek lodges State Significant shop top housing project in Five Dock precinct" data-entity-type="file" data-entity-uuid="abde734c-1e31-4a97-a1d2-fa9bcf31c380" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/building%20podium.png?VersionId=fNUupP6u146yEytQT31kKVRxwtACgPpP" /></p>

<p>Develotek is emerging as an active participant in the state’s affordable housing-led uplift pathway. The developer recently secured approval for a 34-storey mixed-use tower in Chatswood, where it similarly leveraged the in-fill affordable housing provisions to increase scale and deliver a 101-unit scheme with dedicated affordable apartments.</p>

<p>Their entry into Five Dock places them alongside a growing list of developers targeting the suburb ahead of its anticipated transport uplift, with Sydney Metro set to extend into the area. Major players including TOGA, Deicorp, and One Global Capital are all progressing large-scale precinct-style developments nearby, collectively reshaping the low-rise industrial fabric into a higher-density mixed-use corridor.</p>

<p>The Five Dock site sits within the Kings Bay Precinct, a key renewal area under the Parramatta Road Corridor Urban Transformation Strategy, where planning controls support significant uplift tied to affordable housing delivery. The consolidated 3,158 sqm site is currently occupied by low-rise industrial uses, including warehouses and vehicle workshops, earmarked for transition.</p>


First Look: Develotek joins in Five Dock apartment boom

<p data-end="132" data-start="47">Ascot’s Racecourse Road continues to be a hive of activity for Brisbane developers.</p>

<p data-end="359" data-start="134">Following Fortis and GRAYA, which are both preparing new projects along the key strip connecting Kingsford Smith Drive and Eagle Farm Racecourse, local developer <a href="https://www.apartments.com.au/developers/skyhold">Skyhold</a> is the latest to lodge plans for its own development.</p>

<p data-end="510" data-start="361">The group is proposing One One Two Residences, a boutique project comprising just seven apartments, named after its address at 112 Racecourse Road.</p>

<p>The proposal outlines a five-storey building on an 810 sqm site. The built form slightly exceeds the four-storey expectation under the neighbourhood plan, aligning instead with the emerging character of the strip. As the planning report notes, “the locality is characterised by a transition toward medium-rise residential development, with a number of recent developments… above the stipulated height limits.”</p>

<p><img alt="First Look: Skyhold lodges plans for boutique Ascot apartments as Racecourse Road revival gathers pace" data-entity-type="file" data-entity-uuid="ec577631-8c51-4163-960e-e7b3a77d655b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Ascot.png?VersionId=iAzQ46D4Uu1UqiS0mVnlcy9jeFKBpJIj" /></p>

<p>Designed by 111 with landscape architecture by <a href="https://www.apartments.com.au/landscape-architect/paul-bangay-garden-design">Paul Bangay Studio</a>, the scheme adopts a layered architectural approach with strong articulation and a subtropical response. Deep balconies, integrated planters, and a mix of masonry and textured finishes define the façade, while upper-level setbacks reduce perceived bulk. The architectural statement describes “a series of horizontally expressed layers, defined by deep balconies and a consistent robust material palette,” aimed at delivering a refined streetscape presence.</p>

<p>Apartments are configured as large-format residences, including multiple three-bedroom layouts and a full-floor penthouse, supported by ground-level parking. A rooftop terrace will provide communal amenities including a pool and landscaped recreation areas. The design prioritises privacy, natural ventilation, and greenery, with planting integrated across all levels to soften the building form and contribute to the public realm.</p>

<p><img alt="First Look: Skyhold lodges plans for boutique Ascot apartments as Racecourse Road revival gathers pace" data-entity-type="file" data-entity-uuid="1e1219bd-b45a-4d7f-bbc7-7207d7b2fc94" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Ascot%20entry.png?VersionId=JIoUOLMgQ5xWpEF0etEI3ffIoIVjD7gO" /></p>

<p>The proposal sits within the Racecourse Road precinct, a key mixed-use spine in Ascot that continues to attract renewed development interest.</p>

<p>Later this year national developer Fortis will launch its own boutique development, which, pending council approvals, will be 16 apartments designed by Koichi Takada Architects, just down the street.</p>

<p>“Racecourse Road is going through a massive revitalisation and we’re proud to be a part of that transformation,” said Fortis's QLD General Manager, Dan Boman.</p>

<p>Nearby, GRAYA is advancing its larger-scale The Gallery, a mixed-use shop-top housing project designed to act as a “catalytic project for Racecourse Road.”</p>


First Look: Racecourse Road, Hamilton revitalization to continue as Skyhold joins the party

<p>Twenty-five years after launching one of Australia’s most visionary and successful masterplanned beach communities - Casuarina on the Northern NSW Tweed Coast - developer Consolidated Properties Group has unveiled plans for an $800 million sister project located 10 kilometres south, at Cudgera Creek near the coastal town of Pottsville.</p>

<p>CPG has taken the wraps off Caldera, a 78-hectare masterplanned village that builds on the legacy of Casuarina and aims to help address Northern NSW’s coastal housing shortage via the delivery of 550 homes built in a sustainable manner and addressing affordability and housing diversity, while also focusing on architectural and ecological merit.</p>

<p>Caldera is being brought to life by the same creative team that delivered Casuarina, led by Consolidated Properties CEO and chairman Don O’Rorke, Hutchinson Builders chairman Scott Hutchinson and renowned urban designer Brian Toyota, of architectural practice Bureau Proberts.</p>

<p>CPG has lodged a rezoning application with Tweed Shire Council for the Caldera site, which has been designated since 1991 as the Dunloe Park Urban Release Area, the final land release area within the Pottsville locality and one of only four remaining growth areas along the entire Tweed coastal strip. Preliminary plans for Caldera feature a 13-hectare retail and commercial precinct at the core of the village, surrounded by meticulously planned residential areas comprising around 550 homesites.</p>

<p>The retail hub will be anchored by a Coles Supermarket and will offer 7000 sqm of retail and 23 commercial lots designed to serve the local community and bring together curated shopping, dining, gym, wellness, childcare, medical and other essential services.</p>

<p><img alt="Cons prop" data-entity-type="file" data-entity-uuid="fca7dc71-4b71-45b1-bb04-5a60bd7158d0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%208.34.04%E2%80%AFAM.png?VersionId=vAKwIvLuwmTKj6blHJRYIEeXS_8lCgUx" /></p>

<p>The project will create more than 1500 jobs over its development cycle, according to its economic modelling, and significantly address the shortage of employment land in the Tweed.</p>

<p>The residential areas will encourage a sense of community via a cohesive urban design that encourages walking, cycling, enhanced resident connectivity and reduced reliance on cars via bike paths and pedestrian-friendly streets.</p>

<p>Homesites will include a range of options from premium ridge-top homes to affordable housing options, ensuring a community that is inclusive of different income levels and designed to appeal to a wide demographic from baby boomers to families, singles and professionals. Architectural and planting covenants on home building will support the village’s built form and protect its character.</p>

<p>O’Rorke says CPG intends Caldera to be a model project delivered efficiently in a dedicated urban release area and ‘very much for this region and for this time’.</p>

<p>“Our vision for Caldera is to create a modern coastal village with its own unique northern NSW identity,” he said.</p>

<p>“Building on our legacy of Casuarina, 25 years on, this new village is designed to stand apart, offering the future of modern living, balancing the natural beauty of the region with contemporary amenities and convenience.</p>

<p>“Caldera will be more than just a place to live - it will be a welcoming, inclusive coastal village neighbouring Pottsville that invites visitors and embraces new residents. With its strong ties to the land, vibrant lifestyle and sense of place, Caldera will set a new standard for village living in Northern NSW.”</p>

<p><img alt="CPG" data-entity-type="file" data-entity-uuid="9a5a7cf4-5f76-4ddf-bd05-c8fb77d0a787" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-20%20at%208.33.59%E2%80%AFAM.png?VersionId=J1CzCGD7kE7fcAMd41V4pKAf_sI4L5Jv" /></p>

<p>The project’s centrepiece is environmental sustainability, with comprehensive wetlands protection measures and planting of native trees, parklands, village greens and communal grounds to enhance the natural beauty of the area.</p>

<p>CPG will also deliver a developer-funded wastewater treatment plant to ensure zero ocean outflows and provide high quality long-term infrastructure for Tweed Shire.</p>

<p>A key focus is wildlife management planning, including extensive conservation controls for the West Pottsville koala population, aligned with Tweed Shire Council’s Koala Plan of Management and designed to enhance koala habitat connectivity and future population growth.</p>

<p>Caldera will extend the existing koala corridor by connecting koala precincts west of the Pacific Highway with populations in the north and east precincts. A koala underpass will be created under Pottsville Road to complete the connection of this important corridor. Native tree plantings will expand essential koala food sources, while approximately eight kilometres of exclusion fencing will be constructed to safeguard the koalas from urban threats.</p>

<p>The Caldera site is nestled in the hills of Cudgera Creek and benefits from its rich natural surroundings including the Pottsville Wetland, Cudgera Creek Nature Reserve and nearby Pottsville Beach.</p>

<p>It takes its name from the surrounding Tweed Shield Volcano and Caldera, the vast bowl-shaped depression stretching from Byron Bay to the Queensland border that 20 million years ago was the world’s largest shield volcano and which has shaped the region’s striking landscape, with Mount Warning standing as one of its most iconic features.</p>

<p>The development is a joint venture between CPG and Pottsville Development Corporation, which made its first investment in Pottsville more than 45 years ago and is the developer of Black Rocks By the Sea, a masterplanned community now part of the fabric of Pottsville and which was the catalyst for the construction of a bridge across the Pottsville Estuary, providing direct access to the beach.</p>

<p>CPG’s $1.5 billion Casuarina Beach township, 10 kilometres to the north of Caldera, commenced construction in 2000 and has become the model for modern Australian, eco-sensitive beachside development.</p>


Consolidated Properties unveils $800m coastal village Caldera in Casuarina

<p data-end="184" data-start="92">Growing national developer Time &amp; Place has announced its fifth new apartment development.</p>

<p data-end="408" data-start="186">With two projects in Manly and two upcoming in Surry Hills and Potts Point, the developer, which expanded beyond Melbourne just a few years ago, is now heading to Mosman. It is planning 53 new apartments on Redan Street.</p>

<p data-end="553" data-start="410">The 3,233 sqm site, spanning <a href="https://www.apartments.com.au/new-apartments/40-48-redan-street-mosman-nsw-2088">40–48 Redan Street</a> with frontage to Redan Lane, is located just under 400 metres from Spit Junction Town Centre. It is reported the developer paid around $100 million for the five-site amalgamation.</p>

<p data-end="762" data-start="555">Time &amp; Place, founded by Tim Price and backed by James Packer’s private investment firm NPACT, has submitted the project as a State Significant Development through the NSW Government’s Housing Delivery Authority pathway.</p>

<p data-end="918" data-start="764">Of the 53 apartments, 42 will be released to the market, with the remaining 11 allocated as affordable housing in line with NSW Government requirements.</p>

<p data-end="1241" data-start="920">fjc Studio has designed the building. In its Design Report, the architect said the diverse mix of dwelling types and sizes, including 11 two-bedroom affordable housing units, 40 three-bedroom apartments, and two four-bedroom residences, will support a broad demographic, including families, downsizers, and key workers.</p>

<p data-end="1519" data-start="1243">The development will rise to nine levels, a height encouraged by the NSW Government due to the site’s proximity to Spit Junction, which has been identified as a low- to mid-rise centre. Developments within a certain proximity to these centres are permitted increased height.</p>

<p data-end="1830" data-start="1521">fjc said the project “achieves an appropriate density outcome for its setting by balancing increased housing supply with strong amenity performance,” adding that it “makes a measurable contribution to NSW housing supply targets through the delivery of additional dwellings and dedicated affordable housing.”</p>

<p data-end="1898" data-start="1832">The new development will replace five existing two-storey homes.</p>

<p data-end="2218" data-start="1900">“By aligning with the objectives of the Housing SEPP and applying careful architectural and urban design principles, the development provides high-quality residential accommodation that integrates sensitively within its established Mosman context and delivers enduring benefits to residents and the wider community.”</p>

<p data-end="2293" data-start="2220">Mosman has become increasingly popular with developers in recent years.</p>

<p data-end="2616" data-start="2295">Developer Abadeen has been particularly active, with Mosman Residences currently on the market and under construction on Clifford Street. It also has an upcoming Burran Avenue project, comprising just three apartments on the Balmoral Slopes, and recently secured the Midas and Honeysuckle nursery site on Military Road.</p>

<p data-end="2729" data-start="2618">Prosker Property has a project on Redan Lane, just a few doors down from Time &amp; Place’s proposed development.</p>

<p data-end="2948" data-start="2731">Developers including Toohey Miller, DARE Property Group, and WINIM also have projects underway in the area. In 2024, a five-year target was set for the Mosman LGA to increase housing supply by 500 dwellings by 2029.</p>

<p>Time &amp; Place entered the Sydney market with Two Tides, its under construction Manly development. Given its sales success, it has secured another development in the area, more boutique, facing the beach on North Steyne.</p>

<p>They are hoping to launch their redevelopment of The Chimes in Potts Point this year, and next year will look to take to market Marlborough House, an adaptive re-use of the landmark David Jones warehouse in Surry Hills.</p>


Time & Place to take on Mosman apartment market

Household Debt

<html><body>
<div>The latest AMP.NATSEM Household Debt report showed that the average household debt in Australia has increased to a new high of $245,000, continuing a prolonged run-up which has seen the average debt per household increase by a factor four since 1988, up from $60,000.</div>
<div> </div>
<div>While the bulk of the rise in mortgage debt has been driven by 30 to 50 year olds, the over 65s cohort also accounts for a fair proportion of the increase in household debt, with more Australians than ever before taking liabilities into retirement.</div>
<div> </div>
<div>Despite this, the latest Australian National Accounts implied that interest serviceability has continued to become easier.</div>
<div> </div>
<div>There are a thousand possible ways to measure this, nine of which is satisfactory: the blue points on the chart below denote interest paid on dwellings as a percentage of total employee compensation minus income tax, while the red points show total interest paid inclusive of consumer debt (excluding unincorporated enterprises) as a percentage of gross household income.</div>
<div> </div>
<div><a href="/images/2015/12/14/Interest.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/12/14/Interest.jpg" alt=""></div>
<div> </div>
<div>
<div>You could spend forever debating what should or should not be included in household income (imputed interest on dwellings, benefits receivable etc.) or backed out of gross household income (e.g. other taxes, transfers, insurance premiums etc.) but the results tend to be broadly similar. </div>
<div> </div>
<div>Of course the results generally appear to be "too low" due to the significant number of debt free households. The important thing to note is the trend, which shows that while the mining boom was in full swing the aggregate mortgage interest repayment burden was tending towards excruciating levels by September 2008 (when the official cash rate was still as high as 7 per cent). but since that time serviceability has become relatively speaking very easy.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Buffers at record highs</span></strong></div>
<div> </div>
<div>The Reserve Bank of Australia (RBA) has noted in its Financial Stability Review that indicators of household financial stress are presently low, with households pushing ahead on repayments to the extent that aggregate mortgage buffers - as measured by balances in offset and redraw facilities - remain at around 16 per cent of outstanding loan balances, or the equivalent of well over two years of scheduled repayments at current interest rates. </div>
<div> </div>
<div><a href="/images/2015/12/14/Buffers.gif" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/12/14/Buffers.gif" alt=""></div>
<div> </div>
<div>
<div>Loan arrears and mortage delinquencies data are also tracking at historically low levels, with favourable delinquency developments having cascaded lower since the 2008 book year. </div>
<div> </div>
<div>A crude comparison the aggregate interest paid to the total stock of outstanding housing credit implies that the average mortgage rate is well under 5 per cent, suggesting in turn that Australians have taken advantage of the very generous fixed rates available through 2015.</div>
<br><div class="separator"> </div>
<strong><span style="text-decoration: underline;">The outlook</span></strong><br><br><div>The first chart above shows the sensitivity of household finances, and especially mortgage repayments, to the unpredictable changes in interest rates. Mortgage repayments are on average clearly very affordable now, but may not be so if interest rates rise sharply.</div>
<div> </div>
<div>The AMP.NATSEM report found that the highest typical debt repayment burdens are to be found in the outer suburbs of our capital cities.</div>
<div> </div>
<div>If interest rates were to rise by 2.5 percentage points - essentially the equivalent of ten interest rate hikes - then the most indebted households could see mortgage repayments rise from 42 per cent of household income to a stress-inducing 58 per cent, while perhaps unsurprisingly the most indebted low income households would be the hardest hit of all.</div>
<div> </div>
<div>An increase in interest rates of 2.5 percentage points would also see repayments for the typical first homebuyer rising from 21 per cent to 30 per cent of household income, or a shade over an extra $8,000 per year.</div>
<div> </div>
<div>There are few indications that the official cash rate is set to move materially higher any time soon, although shifts in capital requirements and funding costs may be another matter. </div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Fragile markets</span></strong></div>
<div> </div>
<div>Unemployment rates have generally been trending down since January 2015, although unemployment rates in Western Australia and the Australian Capital Territory are in an uptrend, and the housing market in Darwin looks exceptionally fragile.</div>
<div> </div>
<div><a href="/images/2015/12/14/UERATE.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/12/14/UERATE.jpg" alt=""></div>
<div> </div>
<div>
<div>Although household financial stress is currently low, it seems likely that there will be some vulnerable housing markets in 2016, which may include;</div>
<div> </div>
<div>-resources regions and markets, with the terms of trade crunch likely to result in multiple mass lay-offs to add to the winding down of capital investment;</div>
<div> </div>
<div>-suburbs and sub-regions which are experiencing extensive over-building of apartments. particularly inner city high-rise stock, and those areas with already elevated and rising vacancy rates; </div>
<div> </div>
<div>-off-the-plan developments which will be adversely impacted by APRA's tougher deposit measures; and</div>
<div> </div>
<div>-outer suburban fringe locations in Sydney which saw a massive spike in investor activity and rapid price growth in 2015.</div>
<div> </div>
<div>I'd include a generic entry here for "mining towns", but many have been so utterly smashed already, leading to investor defaults and bankruptcies, since not only were prices unsustainable, so too were rents, and even tenancies. </div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Auctions</span></strong></div>
<div> </div>
<div>Sydney's preliminary auction clearance rate rebounded a bit to 55.2 per cent this week, with outer suburban markets looking particularly dormant, The strongest auction market was a resurgent inner west, with a strong preliminary auction clearance rate of 74.6 per cent (<em>CoreLogic-RP Data</em>).</div>
<div> </div>
<div>This month's Labour Force data showed that New South Wales economy has generated a seasonally adjusted +176,000 jobs over the past year, for an outrageous employment growth rate of +4.9 per cent (trend +160,000 jobs, or +4.4 per cent). The Detailed Labour Force figures, which provide more colour by city, region and industry will be released on Thursday. So stay tuned for that and more this week. </div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</div>
</div>
</div>
</body></html>

pwargent-M4siyDbqQY

Record household debt of $245,000: Pete Wargent

<html><body>
<p>Each quarter the Reserve Bank (RBA) publishes household finances data which look at the ratio of household debts and assets to disposable income. The latest data shows households are becoming more indebted at the same time as the value of their assets are increasing.</p>
<p>According to the RBA, the ratio of household debt to disposable income was recorded at 193.7% at the end of June 2017.  The ratio sits at a record high having increased by 2.0% over the quarter and by 3.9% over the year.  Unsurprisingly, most of this debt is housing related; the ratio of housing debt to disposable income is recorded at 136.4% having increased by 1.4% over the quarter and 3.9% over the year.  </p>
<p>The first chart highlights how much household and housing debt has increased over time relative to disposable incomes.  It is also noticeable that since the financial crisis the rate of escalation has slowed.  Further data from the RBA reveals that of the 136.4% ratio of housing debt to disposable income, 103.2% is held by owner occupiers with the remaining 33.2% held by investors.</p>
<p><img src="https://www.corelogic.com.au/sites/default/files/styles/article_image_570w_/public/2017-10/2017-10-09-ppimage1.png" alt="2017-10-09--ratioofhouseholdandhousingdebttodisposableincome" width="570" height="272"></p>
<p>The second chart details the ratio of household and housing assets to disposable income.  At the end of June 2017 the ratio of household assets to disposable income was recorded at 935.6% and the ratio of housing assets to disposable income was 516.5%, both of which were record highs.  Over the past year household assets and housing assets have increased by 6.6% and 7.8% respectively, well in excess of the increase in household and housing debt. </p>
<p><img src="https://www.corelogic.com.au/sites/default/files/styles/article_image_570w_/public/2017-10/2017-10-09-ppimage2.png" alt="2017-10-09--ratioofhouseholdnadhousingassesttodisposableincome" width="570" height="281"></p>
<p>By comparing the ratios of assets and debt the RBA also produces ratios of household and housing debt to assets.  The data reiterates that although debt levels are high, at this stage that debt is well supported by assets which are valued substantially higher.  Over recent years the ratios of household and housing debt to assets has actually been falling.  In June 2017, the ratio of household debt to assets was recorded at 20.7% and the ratio of housing debt to assets sat at 26.4%.  </p>
<p><img src="https://www.corelogic.com.au/sites/default/files/styles/article_image_570w_/public/2017-10/2017-10-09-ppimage3.png" alt="2017-10-09--ratioofhouseholdandhousingdebttoassets" width="570" height="283"></p>
<p>A big contributor to the declining ratio of debt to assets over recent years has been the ongoing fall in interest rates to their current lows.  The RBA publishes ratios of interest payments to disposable income for household and housing debt.  The fourth chart highlights that households are paying significantly less interest currently than they were when interest rates were much higher.  At the end of June 2017 the ratio of household interest repayments to disposable income was 8.7% and for housing it was 7.1%.  Lower interest rates also mean that where there is a debt, debtors have the ability (if they choose) to maintain previous repayments which in turn means additional debt is repaid as interest rates fall.  </p>
<p><img src="https://www.corelogic.com.au/sites/default/files/styles/article_image_570w_/public/2017-10/2017-10-09-ppimage4.png" alt="2017-10-09--ratioofhouseholdandhousinginteretrepaymentstodisposableincome" width="570" height="281"></p>
<p>The data highlights that Australian households are heavily indebted, largely due to housing.  While debt levels are high, the value of household and housing assets are, at this stage, considerably greater than the level of debt.  Of course, if household and housing asset values begin to fall in the future, the accompanying debt may not fall at the same rate and that remains the main concern with the ongoing increase in household and housing debt.  Although Australia survived the financial crisis with much less damage than most other countries, it is noticeable how there was a fairly sharp rise in the ratio of household and housing debts to assets over that period.  A more sustained downturn could potentially see a much greater increase in these ratios as asset values fall but the debt against these assets remain.<br> </p>
<p><em>Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/"><span class="s2">here</span></a>.</em></p>
<p>To read the original article <a href="https://www.corelogic.com.au/news/household-debts-and-assets-hit-record-highs#.Wd6d5xOCyuV" target="_blank">click here</a>.</p>
</body></html>

ckusher-ujnxiKuFQs

Household debt and assets reach record highs: Cameron Kusher

<html><body>
<p>EXPERT OBSERVER</p>
<p>The ABS data showed that at the end of the March quarter, household net worth was $10.243 trillion.</p>
<p>While a large figure, household wealth has now fallen for two consecutive quarters and is -0.7% lower year-on-year. The $10.243 trillion in net worth is madeup of $12.701 trillion in assets and $2.458 trillion in liabilities. The recent fall in the value of assets at a time in which liabilities have continued to rise has led to the fall in net worth.</p>
<p>The Reserve Bank (RBA) analyses this data to produce a number of valuable ratios, including: debt, assets and interest payments to household disposable income.</p>
<p>These ratios highlight the impact of high levels of debt at a time in which asset values have fallen but the debt has not fallen at the same pace.</p>
<p>We’ve seen the ratio of household debt to disposable income continue to climb over the quarter, reaching a new historic high of 189.7%. The rise in household debt relative to incomes has certainly slowed; however, it continues to edge higher.</p>
<p>The ratio of housing debt to disposable income is recorded at 140.1% and was unchanged over the quarter. While it was unchanged over the quarter, it remains at an historic high level, highlighting that households remain very sensitive to the cost of mortgage debt.</p>
<p>Turning to the ratio of household assets to disposable income, it was recorded at 927.0% in March 2019. The ratio peaked at 961.7% in December 2017 and has trended lower since. The ratio of housing assets to disposable income peaked at 529.6% in December 2017 and as at March 2019; it was recorded at 483.5%.</p>
<p>The reduction in housing values has coincided with the period in which the ratio of household and housing assets has fallen which is no wonder when you consider housing accounts for around half of the value of household assets. </p>
<p>It's also important to consider is that while the value of assets are falling there has been no reduction in the ratios of debt to income which highlights that asset depreciation has been greater than debt reduction. As a result, the ratio of household debts to assets is at 20.5%, the highest it has been since December 2014 and the ratio of housing debt to assets is at 29.0%, the highest it has been since June 2013.</p>
<p>Despite the lowest interest rates since the 1960s, the ratio of interest payments to disposable income has trended higher years. As at March 2019 the ratio was recorded at 9.1% and although it has been steady for three quarters, interest payments relative to disposable income has trended higher on an annual basis</p>
<p>Furthermore, the ratio of interest payments to disposable income was last this high in September 2013. It is a similar story for the ratio of housing interest payments to disposable income, which is also trending higher, recorded at 7.6%, which is the highest ratio since June 2013.</p>
<p>With interest rates at generational lows there was perhaps, some expectation that households would use the low rates to pay off some debt however that has largely not occurred. With asset values recently falling the data shows that debt pay off has not been as rapid as the declines leading to a reduction in household wealth.</p>
<p>This data is to March 2019 and by the end of June 2019, there were some tentative signs that the declines in dwelling values were starting to level. While this means that there is likely to be a further decline in household wealth over the June quarter, it also suggests there is unlikely to be a meaningful reduction in household debt levels.</p>
<p>As such, household debt levels are likely to remain amongst the highest in the world. At the same time, the value of household assets remain substantially higher than the value of the debt. The cause for concern will be what happens if economic conditions deteriorate materially, leading to weaker labour market conditions and potentially creating some challenges around servicing such high levels of debt as unemployment rises.</p>
<p>Another medium to long-term consideration is a scenario where interest rates eventually start to rise. Households are generally able to service high levels of household debt while interest rates are at record lows, but eventually (probably not for at least several years) interest rates will rise.</p>
<p>If household debt levels remain high relative to incomes under a higher interest rate environment, the result could be weakness in household spending (as households dedicate more of their income towards servicing their debt) and potentially higher levels of financial stress amongst heavily leveraged households.</p>
<p><em>CAMERON KUSHER is the head of research for the Australian branch of CoreLogic</em></p>
<p><em>Kusher regularly posts on the <a href="https://www.corelogic.com.au/news" target="_blank">CoreLogic website</a>.</em></p>
</body></html>

Australian Household wealth falling while debt remains: Cameron Kusher

<html><body>
<div>EXPERT OBSERVATION</div>
<div> </div>
<div>There was a flurry of excitement back in January when previously reported 2017 figures implied that Australia's household debt pile had temporarily nudged against twice disposable income. </div>
<div> </div>
<div>However, the headline number was subsequently revised down.</div>
<div> </div>
<div>The latest ratios from the Reserve Bank of Australia (RBA) show household debt now sitting at at 1.9x disposable income.</div>
<div> </div>
<div>Or 190.13 per cent as at March 2018, to use a bit of false precision, up from 183.51 per cent a year earlier. </div>
<div> </div>
<div>Click here <a href="https://4.bp.blogspot.com/-Jg6DW-0Q4mU/WzqepI3WnUI/AAAAAAAAq2g/IgMCJx3uRN4KTafsk-RgZdhKL9lqNlKiACLcBGAs/s640/RBA1.jpg" target="_blank">to enlarge.</a>
</div>
<div> </div>
<div class="separator"><img src="https://4.bp.blogspot.com/-Jg6DW-0Q4mU/WzqepI3WnUI/AAAAAAAAq2g/IgMCJx3uRN4KTafsk-RgZdhKL9lqNlKiACLcBGAs/s640/RBA1.jpg" width="640" height="392" data-original-height="803" data-original-width="1310"></div>
<div> </div>
<div>There's a lot of debate about what this debt ratio should or shouldn't be.</div>
<div> </div>
<div>It will probably remain higher than was previously normal given the structure of Australia's population and immigration profile, with policy generally taking a keener regard of interest payments and serviceability. </div>
<div> </div>
<div>Although this is a revised series high, the rate of increase has slowed somewhat (while the gross figure also doesn't account for the record mortgage buffers and use of offset accounts racked up through this cycle).</div>
<div> </div>
<div>Moreover, given the precipitous drop in both the stock and flow of interest-only mortgages the ratio is likely to peak relatively soon as income growth also moves beyond the nadir. </div>
<div> </div>
<div>Anecdotally lenders are making it very difficult for brokers and borrowers to see loans written at the present time, which I believe will see the seasonally adjusted monthly value of investment loans pushed down to around $10 billion by the middle of the year, from nearly $15 billion at the 2015 peak.</div>
<div> </div>
<div>Money growth is now at its lowest level in 26 years, and investor credit growth is at a record low of just 2 per cent, even before accounting for headcount growth and inflation. </div>
<div> </div>
<div>
<span>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and </span><a href="https://petewargent.blogspot.com/" target="_blank">blogger</a><span>.</span>
</div>
</body></html>

Household debt higher over 12 months to March

<html><body><div title="Page 1">
<div>
<div>
<div>
<p>Household finance data released by the Reserve Bank (RBA) each quarter looks at the ratios of household debts and assets to disposable income. The latest RBA update shows that while households debt is growing, asset wealth is simultaneously increasing. </p>
<div title="Page 1">
<div>
<div>
<div>
<p>According to the RBA, the ratio of household debt to disposable income was recorded at 193.7% at the end of June 2017 and now sits at a record-high having increased by 2.0% over the quarter and by 3.9% over the year.</p>
<p>According to CoreLogic research analyst Cameron Kusher it was not surprising to see that most of this debt is housing related; the ratio of housing debt to disposable income is recorded at 136.4% having increased by 1.4% over the quarter and 3.9% over the year.</p>
<p>Kusher said, “Clearly, household and housing debt has increased over time relative to disposable incomes. Of note is that since the financial crisis, the rate of escalation has slowed.”</p>
<p>Further data from the RBA reveals that of the 136.4% ratio of housing debt to disposable income, 103.2% is held by owner occupiers with the remaining 33.2% held by investors.</p>
<p>At the end of June 2017 the ratio of household assets to disposable income was recorded at 935.6% and the ratio of housing assets to disposable income was 516.5%, both of which were record highs. Over the past year household assets and housing assets have increased by 6.6% and 7.8% respectively, well in excess of the increase in household and housing debt.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/10/05/Kusher1.png" target="_blank">Click to enlarge</a></p>
<p> <img src="https://www.urban.com.au/images/2017/10/05/Kusher1.png" alt=""></p>
<p><a href="https://www.propertyobserver.com.au/images/2017/10/05/Kusher2.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/10/05/Kusher2.png" alt=""></p>
<p><a href="https://www.propertyobserver.com.au/images/2017/10/05/Kusher3.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/10/05/Kusher3.png" alt=""></p>
<p><a href="https://www.propertyobserver.com.au/images/2017/10/05/Kusher4.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/10/05/Kusher4.png" alt=""></p>
<p>By comparing the ratios of assets and debt the RBA also produces ratios of household and housing debt to assets. Mr Kusher said, “The data reiterates that although debt levels are high, at this stage debt is well supported by assets which are valued substantially higher.”</p>
<p>Over recent years the ratios of household and housing debt to assets has actually been falling. In June 2017, the ratio of household debt to assets was recorded at 20.7% and the ratio of housing debt to assets sat at 26.4%.</p>
<p>According to Kusher, a big contributor to the declining ratio of debt to assets over recent years has been the ongoing fall in interest rates to their current lows. At the end of June 2017 the ratio of household interest repayments to disposable income was 8.7% and for housing it was 7.1%. Lower interest rates also mean that where there is a debt, debtors have the ability (if they choose) to maintain previous repayments which in turn means additional debt is repaid as interest rates fall.</p>
<p>He said, “The latest household finance data from the RBA highlights that Australian households are heavily indebted, largely due to housing. While debt levels are high, the value of household and housing assets are, at this stage, considerably greater than the level of debt.”</p>
<p>“Of course, if household and housing asset values begin to fall in the future, the accompanying debt may not fall at the same rate and that remains the main concern with the ongoing increase in household and housing debt.</p>
<p>“Although Australia survived the financial crisis with much less damage than many other countries, of note was the fairly sharp rise in the ratio of household and housing debts to assets over that period. A more sustained downturn could potentially see a much greater increase in these ratios as asset values fall but the debt against these assets remain,” Mr Kusher said. </p>
</div>
</div>
</div>
</div>
<p> </p>
</div>
</div>
</div>
</div></body></html>

Household debt growing slower than asset wealth as both hit record highs

<html><body>
<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title">It's like<em> deja vu </em>all over again! </p>
<div id="post-body-5346701206206902946" class="post-body entry-content">
<div>The historic ratio of household debt to disposable income was once again revised down, but the trajectory remained up. </div>
<div> </div>
<div>And in the end, we ended up back in the same old place, with an Aussie household debt ratio still at 1.9x disposable income. </div>
<div> </div>
<div>Note that the impact of tax and rate cuts has yet to flow through fully to these figures, so behavioural patterns could change going forward. </div>
<br><div class="separator"><img src="https://1.bp.blogspot.com/-E1JICRVccs4/XY2p48YKbqI/AAAAAAAAx_E/iSC6SMuc62Yj4H-65nfDIT5IdyvUEI7mQCNcBGAsYHQ/s640/RBA1.jpg" width="640" height="378" data-original-height="808" data-original-width="1366"></div>
<div> </div>
<div>The 'record high' headlines will naturally follow in due course, although the ratio was ostensibly about 200 per cent a couple of years ago - before previous revisions were pushed through - and the growth in housing credit has since been crunched lower (to record lows for housing investors, at zero growth). </div>
<div> </div>
<div>The bulk of Australia's household debt remains concentrated in the upper two income quintiles, while net of a huge surge in prepayments the debt-to-income ratio is pretty much unchanged since 2006. </div>
<div> </div>
<div>Treasurer Frydenberg was also lightning quick off the mark to highlight that the value of assets was 5x that of the debt. </div>
<div> </div>
<div>Meanwhile the ratio of household interest payments to disposable income continued to fall and sow sits well under 9 per cent.</div>
<div> </div>
<div>This ratio is now some 33 per cent lower than at the 2008 peak, and trending lower (it was also higher in the late 1980s than it is today):</div>
<br><div class="separator"><img src="https://1.bp.blogspot.com/-p9EkMGT4dH4/XY2p49HieWI/AAAAAAAAx_A/AJhLZqxNtjAwS6pUx5zeVs07A6IQAmC-ACNcBGAsYHQ/s640/RBA2.jpg" width="640" height="370" data-original-height="813" data-original-width="1404"></div>
<div> </div>
<div>Interest rates have since fallen further in the September quarter, so further declines are in the post.</div>
<div> </div>
<div>There has been some mortgage stress, even in spite of the household interest payments ratio being down by a third, mainly experienced in Western Australia and largely related to the forced interest-only mortgage reset.<br><br><div class="separator"><img src="https://1.bp.blogspot.com/-kzDI0RPnsOI/XY245qcXHRI/AAAAAAAAx_k/poT5fkvt4uYJppj8l-6cjZan2M6BGJG3wCNcBGAsYHQ/s640/sandp.jpg" width="640" height="360" data-original-height="803" data-original-width="1422"></div>
<br>That said, S&amp;P expects arrears to fall as repayments have become easier. <br><div> </div>
<div><em>PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>. </em></div>
</div>
</div>
</body></html>

Interest repayments continue to get easier: Pete Wargent

<html><body>
<p>EXPERT OBSERVER</p>
<p>Australian household debt levels have increased substantially over the past thirty years, with the ratio of household debt to annual disposable income rising from 68% in June 1990 to a recent peak of 188.5% in June 2019. Since June last year, the ratio has reduced slightly to 185.0%. Most of the debt held by households is housing debt, which comprises around 76% of overall household debt. Thirty years ago housing debt comprised a much smaller 46% of overall household debt.</p>
<p>The skew towards housing debt can also be seen in the latest Household Income and Wealth survey from the Australian Bureau of Statistics, which showed the median value of debt held against owner occupied dwellings was $102,600, compared with a median debt level of $5,000 for student loans, $3,000 on credit cards and $3,700 on car loans. Most of Australia’s household debt accrual occurred between 1990 and 2010.</p>
<p>The ratio of household debt to income increased by 45.7 percentage points between 1990 and 2000, and by another 49.3 percentage points between 2000 and 2010. The past decade has seen growth in the ratio more than half to 21.5 percentage points, with most of that growth aligned with the property boom between late 2012 and 2017.</p>
<p>Importantly, the value of assets held against the debt has recorded a more significant increase, pushing household net worth to new record highs at the end of 2019. Residential dwellings comprise by far the largest component of household assets, totaling $6.8 trillion, or 53% of household wealth. Household debt levels are important for two reasons.</p>
<p>Heavily indebted households are generally more vulnerable to a ‘shock’ such as job loss, illness or a sharp rise in the cost of debt, which in turn has implications for financial stability. The other key area of concern relates to household spending; heavily indebted households may be more likely to save rather than spend during periods of uncertainty or economic hardship. With around 60% of Australia’s economy dependent on household consumption, a sustained drop in spending activity would have a negative impact on economic growth.</p>
<p>These risks were recently covered in detail by the RBA in a discussion paper released in May this year. The outcomes of the paper noted the risk to financial stability was likely to be relatively low due moderate loan-to-valuation ratios on residential mortgages. In separate analysis from the latest Financial Stability Review, the RBA notes that only 3% of Australian mortgages are thought to be in negative equity. The risks associated with high household debt levels weighing on consumption are more substantial, especially under a scenario where housing prices fell.</p>
<p>While household debt is high, and potentially a concern for consumption, servicing debt is at its most affordable since 1999 due to record low interest rates. The ratio of housing interest payments to household disposable income has more than halved since 2008, from a high of 13.3% to 6.4% in June 2020. With interest rates moving lower since June, it is likely the ratio has fallen even further. Another factor helping to minimise risk is the fact that asset values are substantially higher than the debt held against them.</p>
<p>The ratio of household debt to household assets was 19.4% and the ratio of housing debt to housing assets was 28.2% in June 2020, implying a remarkably large amount of equity is held within the household sector. Other factors helping to alleviate risk associated with high household debt, and potentially support a reduction in debt levels are credit policy and less consumer appetite for credit. Lending standards have improved over the past five to ten years, with a trend towards fewer loans originating with a high loan to valuation ratio and substantially fewer interest only loans.</p>
<p>9.2% of home loans were originated with a deposit of 10% or less in June this year, down from a recent peak of 22% in 2009. Similarly, interest only loans comprised almost 46% of new home loans in mid2015, but have averaged only 17% of new lending since mid-2017. Additionally, loans with a high loan to income ratio have remained low, with June data showing only 5.8% of new home loans were originated with a loan to income ratio of 6% or higher.</p>
<p>It is clear that households became more risk averse through the worst of the COVID period. National accounts data showed the household saving ratio skyrocketed to almost 20% through the June quarter, up from 2.5% in the June quarter of 2019. Given that the virus curve has flattened and consumer sentiment surged in recent months, it is likely the saving ratio will drop. Additionally, the trend in personal credit, which has been in negative monthly growth territory since late 2019, has plummeted since March.</p>
<p>Although the risks around high household debt are manageable at the moment, interest rates will eventually rise down the track.</p>
<p>As debt servicing costs move higher, a heavily indebted household sector would need to devote more of their income towards servicing debt and less to spending, which implies a medium-to-long term risk to household spending. This implies high debt levels may also stagger and slow an economic recovery. If increases in housing debt servicing costs result from higher interest rates, the exacerbated drag on spending could slow economic growth.</p>
<p>Additionally, with household debt remaining high, the sector is more exposed to unforeseen events such as job loss and illness, as well as black swan events like a pandemic or financial crisis. It is likely policy makers and regulators will be keeping watch for any signs of rising household debt or slippage in lending standards that could lead to higher household debt.</p>
<p>Higher LVR lending or higher loan to income ratios could be the trigger for a new round of macro-prudential style intervention. Recent macro-prudential interventions targeted interest only lending and growth in lending for investment housing through 2014 and 2019. Future interventions may be aimed at keeping a lid on household debt levels, and minimizing longer term risk, via firm limits on loan to valuation ratios, loan to income ratios or debt to income ratios.</p>
<p><strong>TIM LAWLESS </strong><em>is the research director Asia Pacific at CoreLogic</em></p>
</body></html>

Household Debt

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Household Debt

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News