According to Edward Chancellor, author of the book titled Crunch Time for Credit (2005) and a member of US Investment Firm GMO’s asset allocation team, Australia is in the midst of an unsustainable housing bubble that could burst at any time.
It’s hard to argue with these claims when reports out today show Australian house prices have surged 20 percent this year, the most since the ABS started the house price series in 2002. Melbourne recorded an unsustainable gain of 27.7 percent followed by Sydney at 21.0 percent. This comes after reports in February that wage growth fell to its slowest pace in a decade last year.
M Chancellor told The Australian, he estimates Australian house prices are more than 50 percent above their fair value, something he cites as a once in a 40 year event. “If house prices were to revert to their historic long-term average (ratio of average price to average income) they would fall quite considerably.”
» Housing market will implode, warns Edward Chancellor – The Australian, 3rd May 2010.
» Housing tipped for price implosion – The Australian, 3rd May 2010
» Soaring house prices strengthens case for RBA to lift interest rates – The Australian, 3rd May 2010.