Financial planners in Perth have been busy lately due to a study by Auspoll. The study showed great concern on the part of consumers regarding mortgage stress and rental stress. Let’s take a look at the numbers in the poll first, then we’ll tell you what they mean and then we’ll provide some tips for those who feel mortgage or rental stress.
Auspoll, a private study funded by News Limited, has not made all of the information from the study available, but according to News Limited, the Northeast suburb of Pearce reports that nearly 3,000 households are currently in mortgage stress. In addition, they report that nearly 33% of renters in Canning are currently suffering from rental stress.
Housing affordability has become a “hot button” issue for Australians, as 84% now say that this issue is more important to them than any other issues, including border security, education and “fast, affordable broadband.”
Australians aren’t optimistic about politicians providing a solution. One in six believe that the Coalition has a clear plan to make housing more affordable while one in eight believe that Labor is capable of alleviating mortgage and rental stress.
For this study, “stress”–either in rental or mortgage–was deemed to be a situation in which “low income households” spend more than 30% of their income paying for their home loans or the cost of housing. ABS 2011 data was used in the study.
By the numbers, over 30,000 WA households are currently under mortgage stress, with over 55,000 suffering from rental stress. In addition, close to 20% of first-home buyers are seen as being at risk for losing their homes if their income is interrupted for even a short period of time.
What They Mean
For many Australians, housing affordability is obviously an important issue. Fortunately, for us in WA, it isn’t as bad as it is in the rest of Australia but there is still a lot of concern. To interpret what these findings mean to us in WA, housing has to be viewed within the economy to provide context.
WA has been shielded from a lot of Australia’s economic woes by the mining boom. Though we were hit by the Global Financial Crisis (GFC), we didn’t have it nearly as bad as many across Australia did. For a while, it was the best of both worlds for those who wanted to buy a home; prices were low, but other economic indicators weren’t nearly as bad as they were everywhere else.
A lack of consumer confidence kept the price of buying a home low while the mining boom provided a sustainable income for many. As more people moved in, rental units were more in demand. By the middle of 2012, it became cheaper to buy a house than it was to rent one in many Perth suburbs.
This brought a lot of first-home buyers into the market, which in turn made housing prices start to rise. In addition, RBA rate cuts have produced an all-time low interest rate, which many lenders are passing on to consumers.
Mining: End of Boom or Just a Hiccup?
WA’s economy is tied to the mining boom. Not only has the resource industry created a lot of jobs directly but they have also created a rise in population, which means more construction of infrastructure and more service sector jobs.
Due to China’s current financial problems, demand for resources has dipped slightly, and mining companies are competing to cut costs while new projects aren’t coming in as fast as they used to. In other words, the mining industry has become a lot more competitive.
Consequently, the mining industry is tweaking operations and cutting jobs. While this may signal an end to the first “mining boom,” we don’t see it as the end of relative prosperity. After the cost-cutting measures are finished taking place, the mining industry will begin to grow again. In addition, we see the dip in new projects as temporary.
What You Can Do Now
Obviously, we can only give individual advice on an individual basis but here are some general ideas.
The most important advice we can give is to look at the long-term, “big picture.” It is relatively safe to say that nearly everyone in the history of Australia who has held on to a piece of property for 30 years has made money.
The other best piece of advice we can give is to see if you can refinance now to take advantage of historically low interest rates.
Call (08) 9472 9766; let our home loan specialists in Perth look at your financial situation today.