Australia facing housing slump

Well what a week it has been. You could be mistaken for thinking every single Australian is pessimistic about housing. We have now got to the stage there is so much bad news it’s impossible to reference even a small subset of it all.

It’s now interesting to look beyond the Australian media to overseas to see what they are saying about the Australian Housing Bubble. This article from the International Herald Tribune is just one :

SYDNEY: Australia may be headed for a housing recession similar to those roiling the United States and Britain.

Prices in the property market — described by the International Monetary Fund in April as one of the world’s most “overvalued” — will fall 30 percent by 2010, according to Gerard Minack, senior economist at Morgan Stanley in Sydney. Prices dropped in all of Australia’s major cities last month for the first time since just before the Great Depression.

“I panicked” when the figures came in, said John Edwards, chief executive officer of Residex., a Sydney company that tracks property prices. “We’ve been doing this for 20 years and have data that goes as far back as 1865, and it’s really abnormal.”

Gee, now don’t everyone panic and please what ever you do, don’t sell all your overpriced assets at once. You could flood the market.

“Australia is headed for a once-in-100-year real-estate slump,” Edwards said. “I have never seen the convergence of so many negatives.”

O.k., now panic.

Household debt has almost doubled since 1999 to around 160 percent of incomes, a higher ratio than in the United States and Britain, according to AMP Capital Investors. The median national house price soared about 140 percent in the same period.

Something we have been preaching here for a couple of years now.

By every metric I can think of, Australian houses are too expensive,”Minack said, costing an average of six years’ earnings, double what Americans paid before their property market started falling in 2006.

Where’s a baby boomer when you need them, “In my day . . “. Oh, that’s right they are too busy looking at plummeting super assets. It’s a worry.

» Australia facing housing slump – The International Herald Tribune, 31st July 2008.