Mortgage belt in stress as election looms

UNSW City Futures

Mortgage stress is spiking in outer suburban communities, and could shape as a major federal election issue according to a new analysis of Digital Finance Analytics survey data, which shows between 50 and 70 per cent of renters and mortgagees in key outer suburban locations are in trouble.

The analysis identifies 12 mainly outer suburban areas of Sydney and Melbourne where the combined total of financially stressed tenants and homebuyers now equates to more than half of all households. Four of these areas are electorally marginal.

Based on a rolling sample of 52,000 households, the survey also shows the overall proportion of mortgage holders struggling with their finances rising from 32.9% in February 2020 to 41.7% in July 2021.

Electorate

State

Locality type

Seat status

Households in stress %

Macarthur

NSW

Outer Metropolitan

Safe Labor

68.0

Chifley

NSW

Outer Metropolitan

Safe Labor

63.9

Werriwa

NSW

Outer Metropolitan

Marginal

61.4

Greenway

NSW

Outer Metropolitan

Marginal

58.2

La Trobe

Vic

Outer Metropolitan

Marginal

57.9

Hume

NSW

Provincial

Safe Liberal/National

57.3

Fowler

NSW

Outer Metropolitan

Safe Labor

54.6

Pearce

WA

Outer Metropolitan

Safe Liberal/National

54.6

Sydney

NSW

Inner Metropolitan

Safe Labor

54.3

McEwen

Vic

Rural

Marginal

53.3

Scullin

Vic

Outer Metropolitan

Safe Labor

52.1

Calwell

Vic

Outer Metropolitan

Safe Labor

51.6

Coinciding with the DFA data analysis, a new report from UNSW’s City Futures Research Centre argues Australia’s housing system needs to be stabilised.

‘With house prices and mortgage borrowing once again surging in 2021, Australia’s household household debt is now at a record national high’ said report lead author Professor Duncan Maclennan. ‘It’s especially concerning that all Australia’s major banks have internationally high residential mortgage exposure. That means Australian households and the overall financial system have become highly exposed to interest rate change rates and external economic shocks,’ he said.

The report finds that, relative to GDP, Australia’s household debt rose from 70% in 1990 to almost 185% by 2020. Three quarters of this debt is in mortgages and 60% of debt held by Australian banks is in the form of residential mortgages, one of the highest globally and greatly exposing the banking system to potential disruption.

The report authors argue that a re-balanced and therefore less volatile housing market would reduce long-term reliance on intermittent ‘macro-prudential lending’ interventions. In achieving this, they advocate for a stronger Reserve Bank role in maintaining housing system stability as part of a more purposeful national government approach to housing market management.

Report co-author Professor Chris Leishman of the University of South Australia

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