Australian Housing Bubble “like a time bomb” and “colossally high” – Experts

Bloomberg today reports that Australian home prices are now 82% higher than in the U.S. and that rising interest rates may pop the bubble.

According to Jeremy Grantham, Australia’s home prices need to fall 42 percent to “return to trend,” – “It’s like a time bomb, just waiting for the rates to become increasingly impossible to support, All bubbles break, they’re the only thing that matter. They break because we live in a mean reverting world. Things go back to normal, even Australian housing prices.”

John Taylor from FX Concepts LLC manager of the world’s largest currency hedge fund said “The Australian housing market went through 2008 well, But I wonder about the 2011 and 2012 period.” He says, relative to incomes, average house prices in Australia are “colossally high”.

Chief equity strategist at CLSA Asia-Pacific Markets, Christopher Wood said the first home owners boost has put Australia on the path to it’s own subprime mortgage crisis. “In the long term, that policy will boomerang back on the Australian economy and the government because all they’ll have succeeded in doing is incentivizing people to buy houses who can’t afford them — very similar to the subprime issue in America”

» Housing Shortage Makes Australian Home Prices Almost Twice U.S. – Bloomberg, 5th July 2010.


  1. Nah it won’t happen here. The FHB grant isnt the be-all and end-all of the housing crisis. The other factors that make house prices skyrocket such as Negative Gearing, Low Unemployment and High Immigration are still the same.

  2. Australian housing will crash due to unemployment increasing as China starts to slow down and only a fool would think otherwise!

  3. I’m an American and even we are starting to hear about AU’s massive housing bubble. Its interesting to read some of the comments too. Many make the same arguments that “Foreigners with money will buy our homes”, or that places like Sydney are simply too desirable and thus people will always pay more to live there. That and there are your typical folks who deny any bubble period.

    I live in the Bay Area, San Francisco, California. Its the most expensive city in the most expensive state of the US. People here said exactly the same things back in 2005-2006 when the boom was at it’s peak. The fact that everyone talked about the housing bubble 24/7 told you that indeed- there was a housing bubble. Guess what? The bubble DID in fact pop and with the exception of some of the choicest bits within or very close to the city and Silicon Valley the prices came down as much as 50-60% in some places. The crash happened 3 years ago and is still for the most part happening. Its still an expensive city. SO much so that we are actually planning to move to Texas ( Austin TX) next year. But at least here in the US ( Not sure about AU) we can move to another major metro that is a fraction of the cost. In San Francisco the average house is around $750,000. In nearby Oakland you can get something for maybe $250,000. In Austin TX you can buy something for $100,000.

    But in any regards, housing prices at the end of the day must adhere somewhat to real local median incomes. If the median house price in Sydney is $600,000, then unless everyone makes $150,000 a year then the prices will correct eventually. Just like San Francisco the prices will probably never be acceptably affordable to even folks making a decent income. But the prices will come down once a certain pain point is met.

    Good luck to you all.

  4. Yeah but 2bob how long will that take? How long is a piece of string? I want the market to correct itself just as much as you do as many of my family have been suffering under this oppressive ponzi housing market. But it’s taking so long and is so well supported by government and financial institutions that by the time it goes boom here the world would have recovered and its start of Aussie House Ponzi Boom 2.0

  5. Averagebloke, You are correct to point out that the Gov has been keeping house prices high but dont count on the rest of the world recovering any time soon as the debt problems in most of the other nations of the world have not been faced upto in fact they have only just started to think about how they will deal with it, and China knows this is a big problem. I think that piece of string has just about run out mate.

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