GLOBAL ratings agency Moody’s has issues a warning to Australia about our housing market amid fears that prices will tumble further if Europe’s debt crisis is not contained.
In a new report, Moody’s says it believes that Australia’s Mortgage Insurance industry may be exposed when Australian property prices start dropping further if funding issues persist in Europe.
The ratings agency warns it remains concerned about the medium-term outlook for the Australian housing sector, as the Eurozone crisis represents a “material” threat and Australia may face the kind of property price crash seen recently in the USA and Europe.
Fitch’s rating agency has reported that the Australian Home Loans that are in arrears are fewer than in past months, indicating that most borrowers do manage to catch up on mortgage arrears.
Moody’s believe that mortgage arrears numbers will go up in Australia over the next decade.
“Since 1990 capital city house prices have increased more than four times while household debt has tripled. Simple metrics indicate that the current price levels are not sustainable.
Mortgage insurers such as Genworth and QBE cover banks for losses on home loans – generally those where borrowers own less than 20 per cent of their properties.
ANZ is less negative on the medium-term outlook but in research published yesterday, the bank’s analysts said they expected house prices to drop further in 2012.
They expect Victoria to have the most significant property price declines.
Latest Real Estate Institute of Victoria figures show Melbourne’s median house price, at $551,000, is already down $50,000 from its peak a year ago.
Moody’s said that despite its concerns, Australian mortgage insurers were well capitalised and the outlook was unlikely to affect the short-term ratings of banks.
The warning comes as official figures show housing starts in Australia tumbled 9.4 per cent in the year to September – the fourth fall in five quarters.