International Monetary Fund team to examine housing bubble

Written by admin on May 2, 2015 – 2:33 pm

The International Monetary Fund (IMF) will send an economic team to Australia next month to check up on Australia’s housing bubble and the increasing risk it poses to the economy, according to a report in the Australian Financial Review today.

James Daniel who will lead the team next month told the AFR, “My first impression from 30,000 feet is that house prices have gone up a lot in Australia, so that will be a big part of the discussion.”

Another part of the discussion will be what (if anything) the government is doing to prevent the bubble, “Even if you were to take the view that house prices are frothy or overvalued, what is the policy response?”

The Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA), and the government has all failed in attempts to get the situation under control. The current government refuses to quarantine tax breaks such as negative gearing and is being passive about foreign investment. The Reserve Bank of Australia tipped fuel on the fire in February, cutting the official cash rate by 25 basis points.

The team is also concerned with Australia’s record high household debt levels, some of the highest in the world, saying, “House prices and household debt are very related.”

Today, The Sydney Morning Herald reports (‘The creeping danger of Australian households’ love affair with credit‘) on figures from the Wesley Mission suggesting almost 40 per cent of Sydney households are now technically insolvent, despite record low interest rates.

» IMF to probe Australia’s record property and debt levels – The Australian Financial Review, 2nd May 2015.

» The creeping danger of Australian households’ love affair with credit – The Sydney Morning Herald, 2nd May 2015.


Posted in Australian Economy, Australian Housing, Banking Regulation, Sydney Housing Bubble | 8 Comments »

8 Comments to “International Monetary Fund team to examine housing bubble”

  1. THEO Says:

    That is great. More suits and ties are coming to give us advice on economic matters. Its bad enough the suits and ties(politicians and their economic advisers)here in Australia have made a mess of everything for most of us while making it pleasant for the more affluent sectors like the Banking and Real Estate sectors, just to name a few. Thankfully the IMF will teach us uneducated and simple folk down under the best course of action to save us from ourselves. I think its time we all stopped listening to the suits and ties and instead personally do what is right for the social and economic future of Australia ourselves and the best way is to put our political ideology last. On another topic, Who gave the IMF a mandate and authority to call themselves a World financial institution? I for one never voted for a world Bank. Did anyone? Maybe we should ask our politicians especially Why? the Reserve Bank of Australia is a private and not public institution

  2. Michael Francis Says:

    Let’s face it. The Government and RBA are going to do sweet FA about our housing bubble. It will soon blow on its own accord.

    In the meantime, every vested interest group from the Real Estate lobby, building industry, media and finance sector (our major political party donors) will make sure this thing will continue for as long as it possibly can so they can milk it for all its worth.
    Those tears from the above for first homebuyers are crocodile tears only.

  3. In Vino Veritas Says:

    As the old saying goes (with modifications) “If you owe the bank $5000 on your credit card and can’t pay it back, you have a problem. However if we all owe the banks $1.6 trillion on our mortgages and can’t pay it back then the banks have a problem”

    So before the SHTF you still have time to increase your mortgage to pay for that overseas trip, that new SUV or perhaps a bigger boat ……the banks can’t bankrupt every delinquent household in Australia as mass mortgagee sales would crash the market even further. We truly live in the lucky country.

    http://www.abc.net.au/news/2015-04-14/is-16-trillion-dollars-in-housing-loans-too-hot/6392586

  4. average_bloke Says:

    I’ll just leave this here:

    http://www.thesaturdaypaper.com.au/news/politics/2015/05/02/negative-gearings-social-carnage-low-income-earners/14304888001828#.VUSbe1LqFWG

  5. Paddy Irish Man Says:

    @ In Vino Verista Says
    The government will make it to hard for normal joe soaps to go bankrupt. Only the bankers developers and government leader will get of easy. This exact situation has happened in Ireland in 2008. Everyone preaching about a soft landing.

    https://www.youtube.com/watch?v=CB2SluAUWJA

  6. Matty Says:

    @ Theo

    The IMF is exactly like the Fed, privately owned on operated for the benefit of the rich: But built to appear for the people:

    http://www.amazon.com/The-Creature-Jekyll-Island-Federal/dp/0912986212

    Get a copy and read it: All of what we are seeing is predicted and explained why.

    Best example recently:
    >5,000 people died in Nepal earth quake: many sleeping outside in the COLD due to the massive aftershocks. They genuinely need our help.

    But what is top of every news service? The deaths of convicted drug lords…

    I have a sick feeling in my stomach that the recent announcement by Abbott and Hockey is pure lip service… I suspect nothing will come from this.

  7. Arthur Ponzirelli Says:

    Another junket by a bunch of banking oxygen thieves, who woulda thought! The IMF have been calling this a bubble for years, now they’ve got to see it on the ground for themselves. Business class flights and 5 star hotels to boot? Spare us. Save some dough and just read this oxygen thieves. It’s titled ‘Think New York Housing Is Expensive? Try Wollongong’ and sums it up succinctly;

    http://www.wsj.com/articles/worry-over-debt-as-australian-house-prices-rise-1430207189

    Some pretty insightful comments at the bottom.

  8. Stanley Chai Says:

    @ Arthur Ponzirelli

    “Succinctly” Just learnt a new word…thanks, nice one 🙂