“Stressed” Australians Struggle With Record Debts As Housing Market Overheats
by Tyler Durden
ZeroHedge.com
Jun 7, 2017
Australians are dialing back their spending on everything from clothes to cars as sky-high housing costs, the result of a housing bubble fueled by Chinese buyers, threaten to finally derail the country’s twin asset bubbles – housing and stocks.
But rising mortgage debt isn’t the only thing squeezing Australian customers, as Reuters reports. Inflation on essential items like food, electricity and insurance is accelerating, meaning Australians are also paying higher prices for basic consumer goods.
Australia’s real-estate prices have been rising for more than 25 years with hardly a pause – the last time real estate prices saw a meaningful pullback was during its last recession, in 1987. Reuters reported Tuesday that Australia’s debt-to-income ratio has climbed to an all-time peak of 189%, according to the Reserve Bank of Australia.
While sky-high home prices are, in part, responsible for Australians’ record debt, a sudden drop in valuations would only exacerbate the problem by squeezing those who paid a premium for their homes when the market was at or near the top. Many of these buyers are now saddled with high mortgage payments and little equity in their homes.
“We are seeing a considerable spike in stress even in more affluent households. Large mortgages, big commitments but no income growth,” said Digital Finance Analytics Principal Martin North. “Stressed households are less likely to spend at the shops, which acts as a drag anchor on future growth.”
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