Moody’s warn on housing bubble and credit negative risk for banks

June 8, 2016 admin Australian Economy, Australian Housing 12

Moody’s Investors Service has warned today, the recent resurgence in house price growth following last month’s rate cut would been seen as a credit negative for Australian banks.

The surge, “against a back drop of an already-high level of household indebtedness” would increase the sensitivity of Australian banks to a housing downturn.

The report stated, “And although we expect such an adjustment to be gradual, the likelihood of an outright downward correction in prices is rising.”

» Resurgence in housing prices and debt a greater risk for banks, Moody’s says – The ABC, 9th June 2016
» Moody’s rings alarm on housing – The Australian, 8th June 2016.
» Moody’s flags housing risk to Australian banks as investors surge – The Courier Mail, 8th June 2016.
» Moody’s: Australian banks face increased tail risks from rising house prices – The Star, 8th June 2016.




12 Comments

  1. A clear case of shutting the barn door after the horse has bolted. Moodys and the other credit rating agencies who have in the past been bought off by the banks can obviously see that they are now insolvent. Due to the banks’ extremely high leverage a 4% downturn in their asset values would see them joining the government welfare queue. As the ratings agencies were a large contributor to the last GFC they obviously feel the need this time to jump ship early in order to retain some semblance of credibility.

  2. ha ha same old thing, its like Australia’s very own groundhog day. Wash, rinse, repeat. Only the tipping point can save us now.

  3. Max D – Forbes did a report on the Australian Banks a couple of years ago and they commented that their loan books resembled the banks in the US prior to the housing crash in the US. I doubt if they have got ‘better’.

  5. Remember Lehman was rated investment grade AAA the week before it imploded, ratings agencies are mainly tools of the Banking cabal.
    DYODD.
    There should only be two investment “grades”

    1 Too big to fail

    2. Too small to give a damn about.

  6. @Swaggie

    Nearly there: It’s more like

    A:Those that get bailed out AKA They give the politicians the ability to get elected

    B: God-damn taxpayers who are letting the team down aka the 95%

    The ratings agencies exist because the banks/investment firms PAY them to rate them……. See how that works? If you don’t rate them well you don’t get your commission: It’s how the entire finance world works, it’s all about greasing palms, there are only a handful of ethical finance mobs in the world sadly.

    Yes, agree, DYODD, and have the guts to ask the questions no one else is: If 96% of people retire with some form of government support, it shows that only 4% know how to play the game properly. If you’re relying on the government in retirement, your a super easy vote!

  8. The AAA rating will be downgraded, without doubt. It’s simply a case of don’t say you weren’t warned.

  9. They did a similar report couple of months ago arguing growth in housing values will slow and there will be no bust. With this report they’re just covering their ass and presenting an alternative view. But they’re 100% on the money, housing is the biggest risk.

  12. I don’t know much about the history of economics, but thankfully we have scholars that do:

    The alternative was for infrastructure to be owned in a pattern much like absentee landlordship, enabling rent-extracting owners to set up tollbooths to charge society whatever the market would bear. Such privatization is contrary to what classical economists meant by a free market. They envisioned a market free from rent paid to a hereditary landlord class, and free from interest and monopoly rent paid to private owners. The ideal system was a morally fair market in which people would be rewarded for their labor and enterprise, but would not receive income without making a positive contribution to production and related social needs.

    Adam Smith, David Ricardo, John Stuart Mill and their contemporaries warned that rent extraction threatened to siphon off income and bid up prices above the necessary cost of production. Their major aim was to prevent landlords from “reaping where they have not sown,” as Smith put it. Toward this end their labor theory of value aimed at deterring landlords, natural resource owners and monopolists from charging prices above cost-value.

    http://michael-hudson.com/2015/09/killing-the-host-the-book/

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