Housing Crises Is Not Over: Should You Be Worried?

  • Oct 26, 2018 AEDT
  • Team Kalkine
Housing Crises Is Not Over: Should You Be Worried?

As per QBE Insurance Group Limited (ASX: QBE), the fall in the housing prices is not over yet and further fall is in store. QBE Housing Outlook report stated that Sydney is expected to witness a further fall of 3.5% in 2019 and expects that the momentum is expected to build up in 2021. Melbourne is expected to witness a steep decline with respect to the house prices of 4.2% in the next year. The primary reason which has been impacting the housing prices is the stricter lending guidelines which have been impacting the borrowing behaviour of the housing investors. As a result, the housing market has been witnessing the negative impact as auction clearance rates witnessed a sharp fall. The strong downward momentum was witnessed in the September 2018 quarter as, nationally, housing prices declined 2.6% while the units witnessed the fall of 1.6% during the same period. According to the analysts, the higher impact of the falling prices has been felt on a specific price range. Generally, the houses which have been priced in the middle to the upper range are witnessing more impacts from the crisis in the housing markets. The increased first-home buyers have been able to maintain the competition in the houses which are priced in the lower range. 

However, the robust momentum was visible in the lending with respect to the first-home buyers. The top management of QBE Lenders’ Mortgage Insurance stated that a number of first-home buyers have started showing interests. This positive momentum was witnessed mainly because of the government schemes launched. Earlier, the markets were largely controlled by domestic as well as international investors and they have reaped the benefits of the lower interest rates. Broadly, the banking sector has also been witnessing the negative impacts primarily because of the regulatory pressures. These regulatory challenges have been pressurizing the banks to put the restrictions with respect to lending facilities. The management of QBE is of the view that for the time-span of the next twelve months, the opportunities still prevail for the first-home buyers.

Since the beginning of Royal Commission, the banks are inclining more towards the riskier lending and thus, the steps or methods which have been followed by the banks to evaluate the loans have stood up in the spotlight. Even though the interest rates are substantially lower, the homeowners in Australia have been witnessing increased financial pressures. As per QBE, the house prices in Brisbane are expected to witness a substantial rise of 11.3% by the mid-2021. However, Canberra, Darwin, Hobart as well as Perth are expected to witness a decent rise in the house prices within the span of the next 3 years. The prices in Adelaide are expected to experience a rise of 12.4% by 2021.

At the time of writing, the stock price of QBE Insurance Group Limited is trading at A$10.890 per share which implies the fall of A$0.280 per share or 2.507% intraday. However, the stock price is presently trading in its higher range and is having an annual dividend yield of 2.33%.


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