Jp Morgan Overview Australian Housing

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An Overview Of Australia's Housing
Market And Residential
Mortgage-Backed Securities
Primary Credit Analysts:
Vera Chaplin, Melbourne (61) 3-9631-2058; vera_chaplin@standardandpoors.com Erin Kitson, Melbourne (61) 3-9631-2166; erin_kitson@standardandpoors.com Kate J Thomson, Melbourne (61) 3-9631-2104; kate_thomson@standardandpoors.com

Table Of Contents
Australian RMBS Outlook
Australian Government Support
Australia's Economy And Demographic Trends
The Australian Housing Market
The Australian Residential Mortgage Loan Market
The Role of Lenders' Mortgage Insurance
Housing Loan Product Types
Australian Legal And Regulatory Systems Applicable To RMBS
Key Structural Issues Of Offshore RMBS Issuance
Performance Of Australian RMBS
Appendix 1: Australian Capital Cities Established House Price Index Related Criteria And Research
Useful Links
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

AUGUST 27, 2012 1
1003640 | 301691467

An Overview Of Australia's Housing Market And
Residential Mortgage-Backed Securities
Investors in Australian residential mortgage-backed securities (RMBS) continue to benefit from the strong credit performance of the underlying residential mortgage portfolios. However, there is only muted growth in new RMBS issuance activity where real-money investors, including limited foreign investors, are gradually re-emerging. Until quite recently, the Australian government's partake in Australian RMBS has been heavily relied on to underpin the utility of Australian securitization as a source of funding for mortgage originators--who themselves are experiencing a reduction in demand for credit.

Any sustained increase in issuance is dependent on the renewed confidence of offshore investors, who held close to two-thirds of Australian RMBS when the total outstanding RMBS were at their peak in 2007. Some of those investors have exited the market and are not likely to re-emerge, while others are focusing on managing their existing investments.

The Australian economy has performed strongly in 2012, benefitting from the economic conditions in the Asia-Pacific region and demand for its commodities, especially from China. Residential property prices in most areas have softened during the past 12 months (charts 25-31), easing concern over a major price correction. Households have remained cautious with their financial management, evidenced by a significant increase in household savings (chart 14) and a decrease in credit demand. Housing-loan market participants--industry bodies and regulators--continue to take measures to restore investor confidence, including strengthening lending practices and regulations, simplifying debt structures, providing additional creditor protection, and finding ways to enhance information flow and transparency. This article provides our outlook for Australian RMBS, and factors underpinning their credit quality. It provides an overview of the market's operating environment, structure and performance. In particular, this research provides an overview of:










Australia's economy and demographic trends;
The Australian housing market;
The Australian residential mortgage loan market;
The role of lenders' mortgage insurance in Australian RMBS;
Australian housing loan product types;
The Australian legal and regulatory systems applicable to RMBS; The key structural issues of offshore RMBS issuance; and
The performance history of Australian RMBS;

To enhance market transparency, Standard & Poor's Ratings Services also publishes its rating methodology and assumptions, periodic RMBS performance updates, commentary articles, scenario analysis and presale reports detailing its analytical rationales supporting the ratings assigned (see references under Related Research).

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

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1003640 | 301691467

An Overview Of Australia's Housing Market And Residential Mortgage-Backed Securities

Australian RMBS...
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