Chief Economist Brian Haratsis from Macro Plan Australia believes that house prices are inflated by 20 per cent and that Australia will have at least 2 rate rises this year. The Economist has told the Herald Sun that."A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands.".
I tend to agree with his thoughts. We are in a real estate market where buyers are really finding it difficult to secure finance to purchase and if they eventually do find finance, they are having difficulty affording the mortgage payments when interest rates rise.
Whilst unemployment rates remain low......there are still buyers who can afford loan repayments whilst they are gainfully employed. As soon as we see unemployment start to rise, which at some stage it will, then we may start to see some homeowners default on mortgage payments.
The flow on effect of rising unemployment is a real estate market where homeowners will be sadly looking to "offload" their homes to reduce debt, but with a flood of owners looking to sell and higher interest rates, buyers may disappear causing the market to slide.
Homeowners could find themselves in a negative equity position where the mortgage debt is more than the value of the property. My experience is that most real estate agents will have great difficulty in selling houses that have more debt than they are worth.......there is just no margin to allow for their commission.
Hopefully not too many homeowners will find themselves in a negative equity position, but if they do, there are solutions available, but not widely reported by the real estate industry.
If you currently have your property on the market but it is overpriced because that is the amount you need to pay the debt, unfortunately your property will not sell. What you need to do is make your property attractive by offering terms that buyers like. Put your property above others. When you make your property easy to buy, then it will be easy to sell!.
If you need some help or guidance selling, ring Dean Carver - Consultant and Real Estate Strategist on (02) 9773 4550.
Dean Carver - Solicitor
Property Lawyer and Strategist
at Carver Lawyers Pty Ltd
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