According to the Global Real Estate Trends report published by Scotia Economics on Christmas Eve, “Australia is the clear front-runner in 2010” when it comes to house asset price rises. The report cites “Housing demand is being supported by low unemployment, while tight supply is adding to the upward pressure on prices”.
The world beating growth in house prices comes at a bad time for Australia, which is also known to have one of the biggest housing bubbles in the world. Figures from the ABS show Australian banks owe overseas investors $352.7 billion dollars, and global fund managers are starting to get very nervous about lending to Australia as the Australian housing market shows signs of stress and could buckle under the weight of extremely high household debt levels at any time.
One such person is Gerard Fitzpatrick, a global fixed income portfolio manager for Russell Investments. He cited to the Herald Sun the example of Ireland where the housing bubble there effectively caused the banking crisis. “I’m not saying Australia is the same as Ireland, but there are definitely similarities, You’ve had a booming housing sector and rapidly increased lending by banks.”
The Scotia Economics report noted Australia has seen Interest Rates increase by 175 basis points since October 2009 and the expiry of the “enhanced” First Home Buyers grant which is causing the “red-hot property market” to cool. They expect a further slow down in 2011. More up to date figures from Australian property groups show house prices are plunging into reverse gear as the “tight supply” turns into oversupply. Such news could make fund managers lending to Australian duck for cover.
» Global Real Estate Trends – Scotia Capital, 23rd December 2010.
» Australia leads world in house price rises – The Sydney Morning Herald, 29th December 2010.
» Australian housing market strongest in the world – The Courier Mail, 29th December 2010.
» Foreign lenders get the property jitters – The Herald Sun, 25th December 2010.
$352.7 billion dollars, would that be this years figure only? Isn’t it much more than that? Or have people paid down much of their debt? Which I’m not seeing so.
I’m trying to figure something out here, when the GFC hit (yes Australia too), the NAB borrowed $4.6 billion and Westpac $1 billion, both from the U.S. Federal Reserve. That comes to $5.6 billion just from that one source. Will we ever find out what the CBA is holding?
Is there any double speak or double think in the name A.B.S?
Time to prop up some good will for the New Year I guess.
If anybody thinks Australian property price is run out of control, look at Taipei, Hong-Kong, SIngapore, Beijing and Shanghai, comparing their annual incomes vs. property prices, you’ll find that Australian property price is really a piece of cake !
If bubble could happen, it will happen to them first, before it happens to Australia.
Australia has the most over valued real estate in the world in comparing earning to price ratios. Forget China and Singapore we are the world leaders when it come to property price bubbles. Interesting to note have it is often quoted that a Australian has a low “unemployment” rate, given the way it is counted no wonder that it is so low! So many people are excluded, then though they receive welfare payments, a more accurate rate when taking all factors into account would be closer to 20% or more(If you included Disability,Single parent pensioners,those that what to work more than one hour every fortnight etc). Another, manipulation of the market to justify the high prices and create false confidence in the Australian market. After all it all about sentiment, without which the greater fool principle would not work!
I love how rather than calling it house price inflation, they’re calling it strong growth.
@botrot, do you have sources for the Australian banks borrowning from the US Fed Reserve?
@ Bill Huntington
NAB, Westpac tapped Fed
“NATIONAL Australia Bank and Westpac were among global banks to borrow billions of dollars in emergency funds from the US Federal Reserve at the height of financial crisis.”
http://www.theage.com.au/business/nab-westpac-tapped-fed-20101202-18i58.html
YAY!
A clear “front runner” eh? does that mean we win a prize?
Oh a recession or maybe even a depression you say?
Just let me get out my wallet, gotta buy another house… errr I mean ticket.
Guys, are you sure Australian banks borrowed from the US federal reserve?, remember news paper articles can be wrong and usually are, I always thought that the RBA is the emergency supply for local banks, then if the RBA gets into trouble they go to the IMF.
@Bill Huntington, Hello Bill, yes John Theodorou (the response directly below your’s) has provided a link from the mainstream media. Mainstream media didn’t really pick up on in until after this (once again) YouTube animation explained it all in detail;
NAB and Westpac’s Secret Bailout Revealed
http://www.youtube.com/watch?v=nsuFnr0dpPc
Funny when a YouTube animation is more credible than professional journalists. Though the mainstream media did make very little (tiny) mention of this a few years back. Both Westpac and especially the NAB may not be around today if it weren’t for those emergancy bailout *loans*. Now it make sense on why (sometimes) foreign media (Telegraph UK) were refering to Australian Banks as toxic sludge pits. Remember these words? “Our Banking system is strong, and our economic fundamentals are sound”.
@Fred, yes Fred the unemployment rate is at around 17-18% currently, up from 14.9% which was the rate at about June 2009. I have the benefit of knowing someone from MissionAustralia and CentreLink. Using the ABS’s method of (not calculating but) determining unemployment, take out a few factors like the, 1 hour a weekers, the I’m on a CentreLink approved help me get a job course, drop the birth-death model, people that were on unemployment benefits for two years then are shifted to sickness payments get counted,..etc you quickly reach 17-18%. Also many people have been moved from the 2-week reporting (or form application submission) period to 12 weeks. I’m tld CentreLink offices are too jam packed. Internally they say business is booming, keep in mind that business is welfare.
Am I in Alice in Wonderland?
With recent (for the Government & Banking System) scare stories centering around overseas investors getting the jitters re. Aussie home-loan overindulgence (and risks of inability to meet payments), NO Government is going to sanction MSM publication of anything that might “upset things” even more! Unfortunately for us, the overseas investors are not stupid, and are very able to do the basic research themselves, so they have a perfectly good idea just how bad things are here – along with a perfectly good idea of the high cost of living, and the effect of recent interest rate rises on disposable income.
If Xmas Retail turns out to be as bad as expected, our overseas investors may well start expecting a far higher risk premium on their money (that’s if they are still prepared to allow us to borrow it in the first place!) 2011 may well turn out to be a very interesting year indeed (for all the wrong reasons!)
Does anyone know why the APM and Fairfax media (SMH, The Age etc) has not reported recent auction activity? It’s normally on tinernet by the following day or Monday at the latest.