US and British house prices are falling. Australian house prices are still rising. Housing here is protected in the short term by strong Australian growth, but that will not last forever.
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Even so, the OECD suggested in 2005 that Australian house prices were the most overvalued of any developed country relative to income or rents.
Our household debt and servicing costs relative to income are high. Households are exposed if rates rise sharply.
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Some say that’s unlikely, but overpriced assets do fall. Do not assume Australian house prices will rise forever.
The article is correct. It appears there is to much focus on sub prime and the US, that sub prime is the only problem and that the US will go into recession in isolation.
The fact is, subprime was a trigger for the bursting of the housing bubble in the US. Subprime is just the first domino falling, hiding the underlying problem which is the housing asset bubble. This housing bubble is a global problem and most countries are not immune. Australian houses are more overvalued than both the US and UK, and Australian’s have much more household debt as a percentage of household disposable income.
» Meltdown puts heat on global house prices – The Herald Sun, 19th January 2008.