According to the Global Real Estate Trends report published by Scotia Economics on Christmas Eve, “Australia is the clear front-runner in 2010” when it comes to house asset price rises. The report cites “Housing demand is being supported by low unemployment, while tight supply is adding to the upward pressure on prices”.
The world beating growth in house prices comes at a bad time for Australia, which is also known to have one of the biggest housing bubbles in the world. Figures from the ABS show Australian banks owe overseas investors $352.7 billion dollars, and global fund managers are starting to get very nervous about lending to Australia as the Australian housing market shows signs of stress and could buckle under the weight of extremely high household debt levels at any time.
One such person is Gerard Fitzpatrick, a global fixed income portfolio manager for Russell Investments. He cited to the Herald Sun the example of Ireland where the housing bubble there effectively caused the banking crisis. “I’m not saying Australia is the same as Ireland, but there are definitely similarities, You’ve had a booming housing sector and rapidly increased lending by banks.”
The Scotia Economics report noted Australia has seen Interest Rates increase by 175 basis points since October 2009 and the expiry of the “enhanced” First Home Buyers grant which is causing the “red-hot property market” to cool. They expect a further slow down in 2011. More up to date figures from Australian property groups show house prices are plunging into reverse gear as the “tight supply” turns into oversupply. Such news could make fund managers lending to Australian duck for cover.
» Global Real Estate Trends – Scotia Capital, 23rd December 2010.
» Australia leads world in house price rises – The Sydney Morning Herald, 29th December 2010.
» Australian housing market strongest in the world – The Courier Mail, 29th December 2010.
» Foreign lenders get the property jitters – The Herald Sun, 25th December 2010.