As Australia’s credit crunch lakes hold, a generation of mortgage prisoners has been born:
At the weekend, I ran into a very worried developer who in June and July had been selling his land as fast as he could get it on the market. Now demand has just stopped. A whole range of speculators who bought land on small deposits will soon have to come up with the money. Many will not be able raise the money and can’t sell their contracts…
About 40 per cent of home owners cannot now shift their place of residence, because they’ve borrowed sums to buy a dwelling that no bank will now lend to them…
And so if they sell their dwelling and move to a different location, looking to buy a similarly priced house or apartment, they will find their loan availability level will be slashed. And so they must stay where they are until APRA allows banks to relax the lending limits… many are also under mortgage stress…
Seriously, what did policy makers expect? If house prices continually outstrip wages growth there will eventually be a correction. The real takeaway is that one of the very foundations of the Australian economy is built on quicksand. That is, there is no depth in wealth generation beyond flogging houses to each other, leveraged by debt.
Gravity was always going to take hold eventually.
