There are a number of indicators across the continent pointing to a slowdown of the Australian housing market. At least this is what a recently released report says. The bi-annual report was developed from a survey of 26,000 bank customers by JPMorgan and Fujitsu.
The chief conclusion of the report is that the home lending market is set to end a 20-year period of uninterrupted double-digit growth. It also makes clear the fact that more and more Australians are choosing forgo a mortgage payment.
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Looking at the research in the report you can see that there are two main reasons that have caused many Australians to reconsider their approaches to housing. Higher interest rates and general living costs both conspire to cut the legs out from under the native mortgage markets over the last couple of years.
The report seems to echo a growing sentiment with home buyers. Analyst Scott Manning, the co-author, believes that lenders must not hold onto too familiar expectations of growth that have been commonplace in the lending markets since the beginning of the 1990s.
Manning went on to talk about a fundamental change of attitude among consumers many of whom would be potential home buyers. He noted that these groups are more likely to avoid debt when they can and prefer to save money. Thriftiness has again become a virtue.
This change in attitude among consumers seems certain to lead to lower profits for Australia's home lending sector. Both the banks and investors will have to adapt to the changing mortgage market. No longer will the robust rates of credit of the last two decades prevail.
Another aspect discussed in the report has to do with changes in the policies of several of Australia's major banking institutions. These are changes that came about during the economic crisis. For instance, both Westpac and the Commonwealth Bank have started significantly reducing their levels of household deposit growth.
Of course, this is not a sustainable position. NAB and ANZ have moved into to fill the growth gap left by Westpac and Commonwealth.
It may be good to look at this situation from another angle. According to an NAB survey the prices of houses have been forecasted to grow by a mere 0.6% throughout 2011. This same report noted that a major reason why Australians have stopped buying property is not having enough available credit to keep the prices reasonable. This is partially due to increased interest rates.
The NAB survey also reported growth trends across the continent. The expectations of many respondents put higher growth in Western Australia, ACT, and New South Wales. The range of growth in these areas was roughly between 0.9% through 1.1%. Meanwhile the Northern Territory and South Australia were expected to see a decline in home prices by next year, adding up to a 0.2% loss.
Despite the inevitable decline of Australia's home lending market investors and some agents are now looking at the rental market for new possibilities. There is the possibility that there will be 3.5% increase in the number of residential renters. Moreover, the ACT, New South Wales, and Western Australia may see percentage increases in those choosing to rent properties from 4.3 to 4.6%.
Forecasts and estimates aside, there is still enough room in the coming months for the markets to change again. It remains to be seen what direction the trends will take the Australian housing market into the future.
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