“I don’t want to stick my head in the sand and say we’ve never had a big correction, the real estate market is a safe bet, nothing can ever go wrong. Because that’s not reality, things can go wrong. I’m nervous about the psyche saying “she’ll be right”.
It’s not the average borrower that drives the market down, it’s the marginal borrower.
Joseph Healy, Managing Director of Judo Bank
Judo released a survey of 1,750 small and medium-sized businesses on Friday, which found that most expected labor costs would continue to rise, but two-thirds of businesses were able to pass those costs on higher. high on customers.
Reserve Bank Governor Philip Lowe pointed out this week that households were sitting on $250 billion in savings to protect them from rising rates, but Healy said he believed there was an “error” in this argument.
“There is so much danger in ‘on average’ assumptions. It’s a bit like saying to a non-swimmer, “it’s safe on the other side of the river because it’s a meter deep on average”, only to realize that there three meters deep in the middle.
“It’s not the average borrower that drives the market down, it’s the marginal borrower. It’s the highly indebted households who have borrowed six, seven times their net income, who have bought two or three properties as an investment.
Healy’s cautious comments come after bank stocks fell dramatically this month amid fears of a rise in bad loans.
Judo’s stock price is no exception – it fell about 20% last month, although it was up 1.4% to $1.42 on Friday.
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