The 2011 Federal Budget released on Tuesday night should come as a welcome relief for aspiring first home buyers faced with chronic affordability issues. As expected, the Government has this time bucked previous trends and decided not to meddle with the property market. Hopefully, this time, the government will leave it to market forces to sort out problem.
Market forces are already at play in the Western Australian property market. Just two days after out of touch W.A. Premier Colin Barnet told first home owners struggling to break into the market, that they need to “adjust their expectations”, state government figures from Landgate showed the W.A. property market is in its worst slump in almost two decades.
Figures from our big four banks show mortgage arrears are starting to re-surface and at a rapid pace. Westpac’s number of mortgages more than 30 and 90 days in arrears are now at levels not seen since the GFC. 90 day arrears are up 35 percent since September as households struggle to make ends meet with rising housing, petrol, food, water and energy costs. At the ANZ, 30 day arrears have jumped 41 percent since September, while 90 day arrears are up 26 percent. The CBA reports an increase of arrears of 11 percent over the March quarter (three months).
But it is not only households feeling the pinch. Data from Australia’s company watchdog, ASIC show 1,491 companies went belly up in March, up from 1,299 in February and 640 in January. The 1,491 insolvencies is the third highest figure recorded since records began. Many of those failures are expected to be in the retail, manufacturing the tourism sectors, the hardest hit from our onslaught of Dutch Disease and high levels of household debt.
Retailers have today lashed out on comments that the retail sector is showing some green shoots, saying many are on a knife’s edge with little room for any more Interest rate rises. This comes as three of the big four predict a rate rise next Month and days after ABS figures reported a shock lost of 49,100 full time jobs in April.
» First-homebuyers unrealistic: Barnett – The West Australian, 11th May 2011.
» WA’s property slump is now the worst in 20 years – The Age, 13th May 2011.
» Alarms ring on rising mortgage arrears – The Australian, 4th May 2011.
» Rising rents, cautious consumers behind rise in insolvencies – SmartCompany, 9th May 2011.
» Warning as retailers on knife’s edge – The Advertiser, 14th May 2011.
» Three of big four banks tip June rate rise – The Sydney Morning Herald, 13th April 2011.
» Shock drop in jobs – The ABC, 12th May 2011.
» Rise in CBA bad home loans – The Sydney Morning Herald, 12th May 2011.
If retailers are on a knife’s edge who’s going to be rushing out to buy a business or start one? Would be even more cautious about mortgaging the primary residence to buy a lease and goodwill. Big or small you only have to have a few bad trading weeks and there goes the old family savings/home. Thinking about the high dollar and buying on the internet now being much cheaper and easier makes me wonder if retail isn’t going to need a bailout soon. (sarcasm)