Market Watch: RBA says widespread mortgage defaults unlikely

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RBA says widespread mortgage defaults unlikely
The gloomy outlook of some analysts that Australian households would suffer severely in a recession with widespread mortgage defaults causing serious issues for banks has been rejected by the RBA. A new report from the bank shows that those households that have high levels of debt, are generally those that are “well-placed to service it.” While there has been a sizeable increase in household debt the RBA’s study, which includes data from Melbourne Institute’s Household and Labour Dynamics Survey, found that the number of households that spend more than their income has fallen, along with the numbers who have struggled to pay utility bills. The bank says that if house prices were to drop by 25 per cent and unemployment was to almost double to 12.4 per cent, the number of households spending more than they earn would only rise by 2 percentage points to 10 per cent.
Source: The Australian
NSW stamp duty plan may be bad news for the market
A proposal by NSW opposition leader Luke Foley that would allow first-home buyers in the state to pay their stamp duty over a 5-year period on properties valued at up to $750,000 may result in further over-heating the market. That’s according to Sam Elbanna of CPM Realty who told the Domain Group that it may encourage people to spend more on the property than they would otherwise have done which would have the opposite effect on the market than the scheme would intend to do. While others say that it may benefit those buying their first home they do not necessarily believe that it is the best way to do it. Real Estate Institute of NSW chief executive Tim McKibbin said that it would be more beneficial to look at adjusting the thresholds for each level of stamp duty, some of which have not been changed in three decades.
Source: The Domain Group
Mixed reaction to super real estate plan
Plans announced by Treasurer Joe Hockey to allow people to use their superannuation funds to invest in property has received mixed reactions. Labor criticised the idea and Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia said it would be of most benefit to the rich. She told The Sydney Morning Herald: “There are significant equity issues when it comes to allowing the release of concessionally taxed superannuation contributions for home equity” as tax paid on super contributions is 15 per cent compared to 45 per cent on income tax for high earners. However, Amanda Lynch of the Real Estate Institute of Australia, which proposed the idea in its pre-budget submission to the treasurer, says that investing in property is a safer bet: “you are actually saving all that equity and the compounding interest will be beneficial. To say that investing in superannuation, which is mainly skewed towards shares, is a safe proposition doesn't hold up to scrutiny.”
Source: Sydney Morning Herald

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