The Negative Equity Trap 

What you are showing here Martin, is that again, the RBA is skewing its opinion of the severity of the loan situation. The RBA is essentially trying to talk up the market risks, the banking risks and is using obsolete data to do so. This is a bit like driving a car but looking out the side windows rather than ahead, straight into reality. So again, they are playing the mainstream media game, the real estate industry game and the loan broker's game. What is alarming is that the cat is out of the bag, in regard to the housing crash, and they are painting a rosy picture as though the unemployment created by a 'poverty effect' of the housing value crash, will not loom larger and larger as the contraction of the economy deepens. Hold onto your hats folks and the RBA is not our friend, it showed this with its hands off approach to APRA and ASIC, the RBA's statutory underlings who were meant to be acting in our interests, in keeping bankers from predating during the euphoric days of Australian exceptionalism. The RBA helped to create this disaster by enabling banks to operate without oversight or duty of care.

A life time of high debt is just not worth it....great update again Martin thank you 🙏

Very well articulated Martin. Some bears get too driven by emotion, while you just stick to the data. Good critique of the RBA's methodology also

Martin: Excellent work! Get some rest, you look tired.

Next - How Negative equity is offset by positive thinking..

We have houses under $300k in Perth now. And rents are not even worth the wear and tear.

The unemployment rate is not low, that’s total BS, how can unemployment be low, when a week doesn’t go by when you don’t hear about some company going broke, outsourcing its labour overseas, or downsizing.

Phillip Lowe could always get a job in one of 'those' parlours after the wheels come off the cart. He's turned 'massaging' figures into an art!

Such a joke RBA saying Aust isn't as bad as Ireland and America. You nailed it when you said the Aust banks may have actually behaved worse AND the sums mortgaged around 2012-2017 could in real terms be more damaging than Ireland and America. Ireland and America were essentially brought over the cliff by bad lending practices over a 5 year period...that's all it takes. Yes you have higher income to service those debts but I really think you could see those under attack...

IO loans have had a $25k mortgage insurance if 25% for a deposit was not available , but allot of the collateral was fake . In allot of cases there is nothing backing the loans . IO loans have only had interest payments made, in most cases the loan is 25K higher than the purchasing price of the property because of the added insurance cost . So the insurance is another percentage of negative equity . Then add stamp duty as another lost percentage of the total loan and price of the property . The insurance and the stamp duty could be 5% negative equity on the price of the property straight away and now there are 15% ? losses on property in Sydney . OMG .......

What I have noticed in a suburban street in Auckland over the twenty or so years that I go to see the in laws. Fifty per cent of the occupants are now Chinese , and the street parking has increased from just visitors to permanent parking for occupants as the drives and garages are now full. So more people are living in the houses now. I would imagine that renting rooms is common and used to pay off the mortgage.

Ahhh....Mr. Martin. You've done it again. Many thanks.

Picking up the sarcasm on the point of a supportive economy!

Thanks Martin. And so the story continues..... I'm looking forward to the next tranche of bank Annual Reports where they have to make provisions for losses. Then we'll start to see some truth as to what's really going on.

Hi Martin. The mainstream media is now starting to say that Auckland prices will go down but a soft landing, just like Aus 1 year ago.

The peak in housing price in 2017 - took them well over 12 mths to mention that !

i appreciate all your work Martin. But how do you produce so much content in such a small space of time? More than any other RU-vid channel. take care of yourself, dont burn out :)

A Yank wants you to track the prices of USED UTES !!

Congratulations I just noticed now 17k subs. ( very tongue in cheek ) the RBA is head quartered in Sydney, just an observation.

Rose tinted indeed.

Thanks David, I imagine it would be time consuming and tiring in going through the data to produce your program. 🙌🏻

hamster will just have to run faster till it drops dead

I believe what will happen when the pressure of defaults becomes more intense there will be a slowing of discretionary expenditure which will reduce sales of many goods which will then show in lower measured sales or what economist call slowing demand. The RBA will be pressured into reducing interest rates and government will be pressured to "stimulate" more by deficit spending. This scenario is a trap that is just kicking the can down the road and loading up the future with debt. More government bonds will be issued to raise funds for government and they will be sold at attractive rates thus crowding out more private investment. Added to this the private sector will feel the pinch of paying more tax to fund the maturity payouts as well as the additional interest payments on those bonds. There will follow slower growth in the private sector. It is a classic slow death scenario of bad management of money by the monopolies in the economy, the Federal government and the RBA.

RBA wants to see what they want.

Looking at that RBA chart seems to indicate that every dollar drop in prices will push an ever increasing number of people into negative equity for quite some time. So unless things improve soon, they could get much worse, much, much faster.

@walktheworld Martin do think the RBA has a valid point regarding the % of loans that are Interest Only and LVR compared to Ireland and USA prior to their crash? Seems to be a significant comparison...perhaps we have seen the worst except for particular sectors like high rise apartments and new housing developments out Sydney west? (everything being equal)

Martin a question on retail figures could febs pickup be a return to school bounce, a case of mums dragging kids through department stores and spending a little on themselves as they go

What if you walk away. Do you have to do time.

First!

RBA basically speaking high to keep Chinese committed... Very "Chinese like" to be honest...

I understand that the RBA is primarily concerned with perception management so as not to stimulate reduced consumption. However, who looks out the for poor souls teetering at the financial distress margins. Not to mention the first home buyers who are being conned into buying with incentives and a distinct lack of risk discussion in the RBA and political narrative.

😬

Philip low. The last name says it all. Low interest rates, Low returns on Investment and a Low care factor for the Australian economy.

Negative equity is still equity, and coupled with negative interest rates makes good investing by banks on new issuance of interest-only mortgages. Would the RBA become so desperate as to spin their ''Good News' this way?

why is there no australian government logo on RBA website? time to wake up people and asked questions...

Is the RBA trying to convince the foreign fund managers, or the Aussie voters of the coming election?

Greed, the carrot that eats itself before you get a meal.

Oh no my property is in negative equity if I sell now I'll lose hu.... oh ...I dont HAVE to sell....long as i make the repayments I'm fine. Even if i can theres a dozen options available like temporary deferment, debt restructuring or even accessing super. People will do what they're doing which is....hold off selling! Genius!

Martin North is my biological father.