Australian Banks Are Sitting On A Staggeringly Large Pile Of Mortgage Money

How much is too much?

Australian Banks Are Sitting On A Staggeringly Large Pile Of Mortgage Money

Image: Reuters

Australia’s property market is a national obsession. To some, it’s the jewel in Australia’s crown, providing a roof over heads and lifelong financial stability. To others it’s a disgrace, with expensive rentals pricing younger generations out of the market. Whatever your stance, you’ll be stunned by just how much mortgage money Aussie banks are holding onto.

It’s been a rollercoaster few years for the Australian property market, with reports that Sydney homes are impossible to buy and selling at a loss, and news that the same trend has now spread nationwide, with property values tumbling while rents only get pricier.

However, if we take a longer view the picture is much clearer: property is only ever getting more expensive. A recent study has shown that 99.9% of Sydney houses are unaffordable to the average Aussie. In 1975, the median house price in Canberra was $33,500. Now, the median price is $1.2 million, an increase of 3500%.

However, what’s even more shocking is the enormous wealth that Australian banks have amassed off the mortgages leveraged through this massive increase in property prices. Indeed, our banking system is built on bricks and motor in more ways than one…

WATCH: The grim reality of Syndey’s ongoing rental crisis.

According to this excellent explainer from the Sydney Morning Herald, less than two decades ago, the big four banks held mortgages worth $360 billion, which equates to about a quarter of national GDP. Today, their mortgage book is nudging $1.6 trillion, or a shopping 70% of GDP.

Aside from being a huge sum of money in its own right, what impact could this have on day-to-day life for regular Aussies? Unsurprisingly, it depends on who you ask, but here are a few of the possibilities.

First, there’s been a massive slowdown in global productivity since the 2008 financial crisis, and the rising price of property could be playing a part….

To cut a very complex story short, if people can’t afford to buy or rent property near centres of industry, it becomes increasingly difficult to find workers for said industry. As such, productivity slows, even in a world of remote working and “digital nomads”.

Queues around the block for rental units are just one sign of a system under strain. Image: ABC

The tricky property situation is also making it harder to find love and have kids. The age at which people couple-up and have kids is increasing, and this might be due in part to the fact that it’s harder to get hitched when you’re still living with Mum and Dad, and even harder to have kids when you can’t afford a house to keep them in.

A worst-case scenario could also mean an unwanted trip back in time. According to the Grattan Institute, a world of ever-increasing property price could take us back to an age of primarily inherited wealth, where your standing and opportunity in the world is wholly dependent on the property holdings of your elders.

Yet again, the nation leans on the Bank of Mum and Dad. We’re grateful for the Boomers and their endless willingness to support their kids, but if it means a rocky ride back to the Victorian world from which the modern iteration of this nation came, I think many would call for a hard pass…