New data from Morgan Stanley suggests high house prices, difficulty getting loans and depleted savings mean more households are stuck in their current home.
Already a subscriber?On Wednesday morning, Australia’s March quarter GDP data is expected to show the economy grew at just 1.2 per cent in the last 12 months, the weakest annual growth since 1992, excluding the pandemic.
Even more noticeable are the signs that higher rates are crimping the supply of credit, with the survey pointing to an increasing propensity to refinance loans or switch lenders in response to higher rates. But changing lenders or hunting for a better loan deal is no easy feat. House prices are at record levels and likely to stay there: the survey shows 75 per cent of respondents expect prices to rise in the next 12 months .
But with incomes rising and rate rises moderating over the last year, the term has all but disappeared.The Morgan Stanley data, however, suggests a new group of quasi mortgage prisoners has emerged. These households may be able to secure a new loan but they seemingly feel little desire to buy or sell in a market where their next purchase is out of reach.
Unfortunately, the supply outlook is poor. Building approvals data fell again in April, with approvals running at an annualised rate of just 157,000, well short of both the decade average of 205,000, and the run-rate of 240,000 that the federal government needs to meet its target of building 1.2 million homes over the next five years, starting from July 1.
“Weakness in housing activity remains a key source of downside risk for the labour market and therefore the broader economy,” he says.Morgan Stanley also does not expect much relief on interest rates any time soon.
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