Australia’s fixation with keeping its housing bubble afloat could cause wealth destruction on a grand scale.
It’s now five years since the GFC. The debrief from this household debt lead crisis in the United States includes a 38.8 per cent fall in median family net worth across all age groups in just three short years from 2007 to 2010.
Australia’s competitive spirit is leading a desire to smash this record.
Chris Vedelago, property reporter for The Sunday Age has today reported:
Desperate property owners on the brink of losing their homes are raiding their superannuation in record numbers, accessing more than $100 million in emergency funds in the past 12 months to keep the banks at bay.
According to the report, 6,500 struggling home owners raided their super funds last year to keep the Australian dream alive, the third consecutive year of increases. Despite interest rates falling, the aggregate value of last financial year’s raid is 99.38 million, up 25 per cent on the previous year and “well above” raids conducted during the GFC.
Obviously, for those who make the emergency raid, there must be some expectation things will get better in the future. They just can’t keep raiding it.
Pauline Vamos, CEO of Association of Superannuation Fund of Australia said “Your super is not there to pay debt, it’s there for retirement.”
If Australia’s housing bubble were to correct, just like many around the world, then these homeowners could be left high and dry, not only without a home, but with little future retirement savings.
Boomers doing it tough
With retirement rapidly approaching, Baby Boomers are increasingly more pessimistic. According to a RaboDirect survey out this week, 62 per cent of Boomers expect the economy to worsen in the next year.
But their own finances is what is really keeping them awake at night, with 30 per cent of Boomers now expecting to enter retirement with a mortgage. 40 per cent in the mortgage ‘hangover’ group, plan to sell and downsize. 30 per cent hope to dip into their superannuation to pay off the roof over their heads, something RaboDirect consider risky, especially after the performance of super funds in the past five years.
» Home owners raid super to pay mortgage – The Age, 19th August 2012.
» Households in financial stress risk losing super security – The Canberra Times, 19th August 2012.
» Boomers haunted by fear of debts – The Courier Mail, 17th August 2012.
Posted in Australian Economy, Australian Housing | 26 Comments »