Earlier this year, it was predicted that the property market will slow down but a more recent report adds that the market should also watch out for increased in mortgage defaults.
According to Domain, a new report shows that more people are expected to fall behind their mortgage payments this year as the housing market slackens. In a monthly review by Moody's Investors Service's on mortgage delinquencies in excess of 30 days, there was a rise from 1.14 percent in October to 1.20 percent in November last year.
Assistant vice president analyst Alena Chen at Moody's expects this trend to continue, even if a strong housing market in Sydney and Melbourne is foreseen to continue boosting the economic performance in their respective states like they did in 2015. She added, "A slower pace of house price growth will mean a slowdown in economic activity and will contribute to a deterioration in mortgage performance in 2016 from current exceptionally healthy levels."
As previously reported, Sydney saw the biggest drop in median home prices at 3.1 percent in the quarter ending December 2015. There are many factors that drove the drop in Sydney's median home price such as the sudden decrease in the number of investors in Sydney which is somehow related to the slowdown in Chinese economy and their government efforts to curb investments overseas. These combined with the slowing economy could cause more people to default on their mortgages.
Domain Group chief economist Andrew Wilson has also weighed in on the possible rise in default, saying that mortgage defaults is a result of a failing economic situation. In addition, according to AMP Capital chief economist Shane Oliver, he could see a slight increase in defaults but it is at very "low levels." He suggests that while the economic conditions in areas become harder and interest rates increase, the rise in defaults may be inevitable but the increase may not be overwhelmingly huge.
