Many people who bought houses on Melbourne's fringes in recent years could be facing financial ruin after a slump in prices has left them owing more to the bank than their homes are worth, experts have warned... (this has) led some financial experts to warn of a 'depreciation time bomb' of negative equity for home owners in fringe suburbs, who owe more to the bank than the value of their homes... there is a risk that some purchase decisions that were made on the expectation of higher long-run average growth rates may have to be reassessed.
Kevin Bailey, principal at Shadforth Financial Group, said his warnings three years ago of a ''homegrown subprime crisis'', created in part by inflationary first home buyer incentives, are now playing out. He said the schemes enticed mostly young people, without savings, to borrow heavily and pay a premium for low quality housing in poorly serviced locations.
"Lots of baby boomer parents who have made money out of property gave sage advice to children to pour their money into bricks and mortar because prices double every seven to 10 years Young people who were sold that lie will find it very difficult to escape and it's a tragedy."
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