SYDNEY: Australian landlords are at risk, according to a report released Friday, which warned that changes to interest rates could spell financial turmoil for property investors. The report by Digital Finance Analytics (DFA) said that over 36 thousand properties would be affected, one in three in Sydney, as rental prices fall and loans are increasingly geared with a higher level of debt to equity. Martin North, principal of DFA said that investors are at risk of not having the income or saving required to pay for the mortgages that they currently hold on their properties, if the rental income wasn’t sufficient, or stopped; with increasing housing supply already causing investor pressure. The governor of the Reserve Bank of Australia, Phillip Lowe, directed his attention to the banks, who he said are too liberal with handing out loans to struggling investors, leading to increased incidents of default in harder economic conditions.
The risk to investors is only worsened with the risk of a housing bubble in Australia, with some economists warning that not only are the current housing prices unsustainable, but also household debt. Lindsay David, founder of LF Economics, has long warned of a property bubble in New South Wales, and told Xinhua a major shock to the economy is inevitable. “New South Wales households, and the economy, are hideously leveraged and dependent on the housing construction boom, and expanding leverage just like the Irish were prior to the Global Financial Crisis,” David said. “Inevitably, this housing construction boom will come to a painful halt. This is essentially a classic credit-fueled housing bubble.” The LFA report said that 25 percent of investors in Melbourne would be at risk, along with 20 percent in Brisbane, and under 10 percent in Adelaide, Perth, and Canberra.
