Australia heads towards an apartment drought
The Property Council is predicting an apartment supply crunch across some of the country’s largest housing markets, wh...
Bleak conditions in the US property market are forcing governments and banks to take drastic action, according to RP Data.
Distressed sales account for 30 per cent of all house sales in the US, while 22.7 per cent of all mortgages have negative activity.
Moreover, 8 per cent of all homes in the country are at 90 days in arrears compared to less than 1 per cent of all houses in Australia, according to RP Data.
In light of this falling market, the government and the banking sector have decided to take action to stop the number of defaulting properties rising.
Banks are offering principal reductions on mortgages and flexible re-payment options rather than facing the losses if the property is taken to market.
“From a mortgagee’s perspective walking away from the mortgage in the US typically results in a seven year black mark against your name in the form of a poor credit rating,” RP Data’s national research director Tim Lawless said.
"However, in some instances those people that have defaulted are still living in the same property. Why? Because the eviction process in the US is very drawn out compared with Australia.”
Other banks such as Freddie Mac and Fanny Mae are renting out the defaulted dwellings rather than putting them on the distressed property market.
The ailing market has also led the US Federal reserve to announce that official interest rates would be steady until midway through 2013 to boost home buyers.
“The certainty around US interest rates is in direct contrast to the Australian mortgage market where the direction of interest rates over the short to medium term still seems to be up in the air,” Mr Lawless said.
Although the situation is vastly different in Australia, Mr Lawless notes the importance of looking at the US property market with a critical eye.
“The mortgage market meltdown in the US has resulted in a greater level of data transparency which is a good thing and potentially one way in which the Australian economy can learn from the changes now being made in the US,” he said.