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March 21, 2016

Housing debt higher than ever


Research by comparison website finder.com.au has revealed that Australians are more indebted to housing than ever before.

Analysis of Australian Prudential Regulatory Authority data by finder.com.au shows the proportion of owner-occupier housing debt per adult compared to credit card and personal loan debt is currently at an all-time high of 89.3 per cent – up from 80.6 per cent in 2004.

Finder.com.au consumer advocate Bessie Hassan says figures show the amount of housing debt per Australian adult has increased by a whopping 136 per cent in 11 years.

“When looking at outstanding bank debt per Australian adult, the amount of owner-occupier housing debt has skyrocketed in the last 11 years of available data – from $20,802 in December 2004 to $49,165 in December 2015.”

Hassan says this was mainly due to Australian house prices rapidly increasing during the period – almost doubling in some cities.

“These increasing prices have pushed up loan sizes, with the average national home loan size jumping from $189,300 in January 2004 to $372,400 this January, an increase of almost 100 per cent.

“This has grown much faster than inflation, which would have increased an asset by only about 34 per cent in the same period,” she says.

“In addition, Australians are becoming more comfortable with housing debt than previous generations, as a result of skyrocketing property costs. Simply put, if you’re serious about entering the property market, this is the predicament you face.”

Graph finder

The research also found housing debt had significantly outpaced credit debt.

“Credit card and personal loan debt – which includes revolving credit, credit card liabilities, leasing and other personal term loans – has remained relatively stable, rising 18 per cent from $4,999 in December 2004 to $5,885 at the end of 2015,” Hassan says.

The trend of housing debt swallowing a rising chunk of personal borrowings would continue as long as demand for Australia’s housing market continues to grow, she adds.

Hassan warns Aussies to consider what a correction in the housing market would mean for them.

“If there were falls in the housing market, like some experts are predicting, it could have profound implications for mortgagees’ capacity to service their debt.”


About Angela Young

Angela Young is the Associate Editor of Australian Property Investor magazine.