I have mentioned the housing situation in
Germany before now. I've also mentioned Australia. The two
are opposites. Germany's real estate market has been doing
nicely while Aussie's has been dropping through the floor.
The problem has been not only that real estate prices have
been falling for the past few years, but that the banks have
been running a mega fiddle on mortgage applications.
This worked well when prices were rising as nobody could
lose, but once prices reverse, all hell breaks loose.
There is one other joker in the pack. Following a court
ruling, banks cant foreclose on a property where it can be
proved they fiddled the books, so not only do they have a
non performing mortgage on their hands, but they have no
collateral to call on either. That makes these foreclosures
serious for the banks. They aren't just taking a small loss
in such a situation, but a major loss. This is hitting the
banks' bottom line rather hard.
It is still not known how common the market manipulation
was, but with over 6% of mortgage holders unable to meet
payments, the situation is serious.
House prices stopped rising a few years ago. In two capital
cities theyíre down 40%. This means the whole market is
teetering into collapse mode.
Here is what is being said about the forthcoming cases
brought by the regulator against one of the banks.
"National Australia Bank will face claims it
used hairdressers and gym instructors to illegally reel in
borrowers who could not afford to repay loans when it
becomes the first bank to be taken to court by the
corporate regulator in the wake of the Hayne royal
NAB's introducer program was savaged at the Hayne royal
commission when it was revealed bank employees were
accepting brown paper bags of cash over the counter."
This is just the beginning. A further 50 court cases are in
the works according to the regulator.
Meanwhile, hundreds of thousands of Australians could join
class actions against the banks. One is already underway.
The precedent now allows them to cancel their loan and keep
Naturally there is a knock-on effect. Who is going to buy
into the market while prices are falling, and likely to
crash much further? Construction has declined for the last
four consecutive quarters. Developers are going bust.
Aussie households are already struggling too. Here's the
Over the past five years Aussie incomes have contracted.
There is one other statistic which is worrying.
Mortgage debt for older Australians has increased to more
than $185,000 from $27,000. Thatís an increase of a massive
600 per cent between 1987 and 2015 for people aged over 55.
Research from the Australian Housing and Urban Research
Institute revealed the groupís average mortgage debt to
income ratios tripled from 71 to 211 per cent over the same
The news can be summed up for investors very simply. Don't
touch Aussie housing with the proverbial barge pole.
Apparently various bankers are trying to sell on their toxic
loans by packaging them up into company stock to be floated
on the stock exchange.
Don't under any circumstances touch any of this stock when
it goes live, probably early next year.
Anything else look bad?
Oh yes, the Aussie dollar is still falling. Presumably it
still has some way to go.
At the moment it looks as though Australia has turned into
the Unlucky Country.