Bank customers withdrawing millions in cash
One in seven mortgagors would owe more than their property was worth if prices fell 20 per cent, according to the RBA, which has also revealed some retail bank customers have withdrawn millions in cash at branches.
In its latest half-yearly review of financial system stability, released on Thursday, the Reserve Bank of Australia said that heading into the coronavirus crisis just three per cent of homeowners were in "negative equity".
If prices fall by a tenth, that share would rise to 6.5 per cent; were values to decline by a fifth, the proportion in the red would rise to 15 per cent.
Some analysts say in a worst-case scenario, property prices could decline by 30 per cent, although that is considered unlikely.
But the RBA does expect the share of homeowners in negative equity to rise.
"The shock to economic activity, and associated uncertainty, has caused a decline in demand in the residential property market, and this will increase the incidence of negative equity if prices decline," it said.
Government restrictions on auctions and open inspections had lowered housing turnover, the central bank noted.
"For households behind on their repayments and with little equity in their homes, very low turnover and declines in housing prices will make it harder to resolve their situation by selling their properties," the RBA said.
Most households entered this "difficult period in good financial health", it said, having enough cash to cover basic living expenses for three months.
"Surveys indicate that about one in five households only have enough liquid assets to get from one pay period to the next," the RBA said. "These liquidity constrained households are typically young, twice as likely to be renting and twice as vulnerable to unemployment compared with other households."
It said over-the-counter withdrawals of cash from retail bank branches had been "elevated" over the second half of March as some customers with "large balances sought to hold precautionary funds".
"This included a small number of customers making very large withdrawals (more than $100,000, and in some cases into the millions of dollars)," the RBA said.
Originally published as Bank customers withdrawing millions in cash