Located in: What the experts say
For some time now the experts have been viewing the property bubbles in Melbourne and Sydney with some scepticism, and the ongoing quest of punters jumping on the “property band wagon” as prices increase significantly within a matter of months. In these types of rapidly rising markets, it has become plainly evident that some borrowers and possibly their brokers have been overstating applications for finance to ensure they would secure a loan, so they could enter the spiralling property market, running on fears of not being left behind. As has been warned, as soon as there is a change in the wind and property prices come off with a double edged sword, interest rates increase, this could then unfortunately see some lenders caught very short.
THE TRUE DEPTH OF THE LIAR LOANS is unknown but some experts have indicated this could be a significant percentage of the market and mainly with more susceptible first home buyers and first investors, who are believed to be the worst offenders. If this does play out accordingly, it will no doubt see a percentage of loans foreclosed and defaulted which will then cause further downward pressure on the eastern states markets and property prices, thus causing some players to exit.
We don’t expect to have the same problem here in the West, as our markets have been lack lustre and flat lining, therefore not pushing the greed factor to the top of the rapidly rising property market on the fear of missing out. There is evidence that a degree of mortgage stress could come into play once interest rates move up a notch or two, but nothing like we could witness on the eastern seaboard. The whole shake out of the Liar Loans on the East coast could prove beneficial to the Perth property market, as the knock on effect of forced sales could see other investors exiting the eastern states market for the favour of the Perth market, where prices are 2 to 2.5 times under prices for comparative property on the east coast.
As uncertain times gather in all financial markets it could be an interesting factor thrown into the overall mix of the property market.