Australia's lazy investment strategy is finally dead
Excerpts from article by investment adviser Mark Gardner:
[...] The people holding five investment properties at 2% yields in suburbs they've never visited, telling themselves they're sophisticated investors, they're not. They're policy dependents. The budget just sent them a bill that was always in the mail.
[...] Residential mortgages dominate [bank] loan books, comprising 54% to 70% of assets depending on the institution. Those mortgages are secured against a property market explicitly inflated by the policy settings the budget just started unwinding.
Australian household debt-to-income sits at 182%, among the highest in the developed world. Mortgage serviceability is at 45% of income, well above the 20-year average of 34%. Big four bad debt expenses: 0% to 0.2% for four consecutive years. That's not a destination. That's a temporary address.
Here's the specific new risk. Remove the buyer pool, no negative gearing incentive on established properties for new investors. Increase sell incentives, lock in old CGT rules before 1 July 2027 or absorb the hit.
You don't need a crash. You just need a few percent of price softness and rising arrears to push bad debts from 0.1% toward the historical average of 0.3%. On a multi-trillion dollar mortgage book.
The exquisite irony: CBA's own chief economist flagged these changes were "locked in" before budget night, and the CEO has publicly supported property tax reform. The bank most exposed to this was telling us it was coming.