Housing bubble, banking and the regulators – A special report on ABC’s The Business.

This week, the ABC’s The Business will air three special reports on “Property, banking and how the government and regulators are handling bubble risk.”

Tonight’s special report can be watched online at Plenty of froth over housing, but is it a bubble?.

Lindsay David, author of Australia Boom to Bust has no doubts we are in a credit fuelled housing bubble showing the ABC reporter, a 65 year old weatherboard home, 45 minutes from Sydney that recently sold for $1.38 million, $300,000 over reserve. The reporter compared the price to other homes overseas and presented data showing over the past 40 years, Australia had the strongest house price growth of any country except Norway. Lindsay also dismissed any notion we had a housing shortage.

SQM Research’s Louis Christopher said at this point the Sydney property market was 25 per cent over valued and would likely to be 40 per cent overvalued by the end of the year. Louis indicated other markets were already correcting, like Perth where rents are down 8 per cent and prices are being held up only by cheap credit. “Darwin was clearly in correction territory.”

The reporter touched on Australia’s record level of household debt, recently hitting 153.8% of household disposable income. Lindsay said this level of debt leaves the whole property market vulnerable to potential prices falls of up to 50 per cent. “What history tells us, is that when bubbles burst, we move back to the long term medians, in the event of deleveraging”

Emeritus Prof. Mike Berry says property bubbles need a trigger to pop, suggesting rising interest rates or moves to limit house lending could trigger the pop. Another external shock, he suggests, could be the Chinese economy “suddenly hitting the wall” that would quickly see unemployment rise and demand for housing “fall quite significantly, quite quickly.”

The ABC reporter concludes, “But it is also possible that the property market could ultimately collapse simply under the weight of its own debt”

The Business airs on ABC News 24 at 8:30pm AEDT.

ยป Plenty of froth over housing, but is it a bubble? – The ABC, The Business, 13th April 2015.

1 Comment

  1. Watched the first one:

    When Mr CBA was sprouting there’s no problem, I could see it written on his face “CBA will keep selling loans until it implodes, doesn’t matter cos the gov’t will bail us out… I wont even loose my job… I might buy some more CBA shares @ $15 while they’re down”

    Isn’t the future bright for Mr CBA types?

    Why aren’t ABC asking small business owners what their turnover and profit is like??? Where is the prosperity in the economy these days?

    There is none: It’s all being sunk into interest repayments.

    Didn’t see one chart of private australian debt…… And with terms of trade collapsing, the only remaining pillar is FIRE,,, which is really a zero sum game…….

    So how do we pay off an enormous debt when infact, as a country we have no income??????

    None of that. Just one honest bloke saying it’s stuffed (and we all know it is) but a few bankers saying “oh it might be overvalued, but no need to worry”

    The bankers don’t know their job at all: EVERY bubble in history bursts, always has, always will…. But they’re accepted as being credible……

    Imagine an engineer building a skyscraper using undersized bolts “oh, they’re slightly undersize, but there’s no need to worry” How long would he have a job?????

    All in all it’s a sick sick game that the rich profit from, while enslaving the masses…. profiting off their labour, each and every minute of the day……..

    Look at the panic in Canberra over the impact of the IO collapse….Let me tell you something Hockey, the collapse of housing will dent your budget far harder than any IO collapse….

    Interesting times….. 100 years ago, the Anzacs created a legacy that every Australian should be proud of. They helped forge the greatest nation on earth: But any of them would tell you your mad to borrow 30X income to buy a fibro s#$tbox in Sydney.

    It’s a great country: But not that great.

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