If this is true then despite endless talk of stretched household budgets, then we should actually see mortgage arrears declining to levels not seen in years.
Fitch Ratings, in its latest Dinkum Index analysing the September 2014 quarter, put loans 30 days or more past due at their lowest level since late 2007.
Fitch said delinquencies dropped by 14 basis point to 1.08 per cent.
Serious arrears also benefited, with loans 90 days or more in arrears sitting at 0.47 per cent, the lowest level since December 2009.
Arrears are expected to remain largely stable in fourth quarter 2014, Fitch said, due to low, stable interest rates, a strong housing market and lending, and relatively low (albeit rising) levels of unemployment."
Great to hear.
While other developed countries have seen serious 90+ day arrears on up to 10 to 15 or more in every 200 mortgages in the period following the financial crisis, the equivalent figure for Australia is incredibly now below 1, which is wonderful news.
The reasons are clear enough, being a combination of very low interest rates and the unique structuring of so many loans in Australia which maintain repayments at the same level when interest rates fall, thus allowing borrowers to build up sizeable repayment buffers when variable mortgage rates have been declining over a period of years.
There is realistically only one direction in which mortgage arrears can head over the medium term from such a pleasingly low base.
Relatively low interest rates are more or less a 'shoo-in' for most of the remainder of this decade, but the other major factor which can cause mortgage arrears - unemployment - is rising in eminence across many regions of Australia.
Where are the Risk Areas?
Fair Warning - Industry Closure Risk
Some on the chat forums have chosen to highlight that withdrawal of Holden may only directly result in a relatively small number of jobs and they have therefore dismissed the risk as insignificant.
That's one way to look at it, but a market is made up by the full range of views, and in this case we'll take the sell side of the equation.
As pointed out here previously, when one considers the total number of jobs which are likely to be lost from the shuttering of the car manufacture industry over the next few years - including from suppliers and support industries - in concert with flow-through impacts of rescinded business investment, consumer spending and so on - the potential impact on economic output of some $29 billion and up to 200,000 jobs nationwide could be prodigious.
It's easy to dismiss the closure of the Holden plant as overblown, and to state that those who do lose their jobs can be redeployed.
Indeed so, but whether or not they can be redeployed within South Australia is another matter entirely.
If the forecast 24,000 jobs are lost in the state, note that the economy has taken fully seven years to add 24,000 jobs, and has added a net total of zero over the last four.
A similar point stands for Geelong (and I own property in Geelong, so this is not merely the viewpoint of vested interest).
Positive Investment Decisions
Buying a home to live in is one thing, of course, but the primary advantage that a property investor has is that they are not compelled to buy property anywhere or at any time, so the shuttering of an entire industry should act as an automatic red flag.
"It might not be that bad" is not a compelling case for an investment decision.
Anyway, that's our view - that you should look for thriving economies, not those about to be sideswiped by a king-hit - so fair warning.
We'll provide an updated report on trends in elevated unemployment rates by region on Thursday of this week, so stay tuned for that.
In the meantime if there is one phrase to look out for which should always make property investors wince it is that "prices can't fall further in this region", which is another alarm bell which has so often foreshadowed financial loss.
- heavy government expenditure of infrastructure projects; and
- thousands of jobs to be cut from the merger of closure of scores of government agencies, particularly in Canberra.
"Of course we'll tell our children that they'll be doing more telework – working from home, cafes, etc.
Everyone knows that's true. The last government said it enough while spruiking the NBN.
It isn't true - at least not so far.
On the working from home phenomenon, the "Two Decades of Change" report is quite conclusive:
In fact, the principal reason given by survey respondents for working from home was that they had become "snowed under" and fallen way behind on their workloads in their main place of work.