Fresh data released today from the China Customs Bureau show imports to China declined 17.7 per cent in the year to September. Exports feared better, falling 1.1 per cent for the same period leading to predictions, GDP numbers to be released next week will be the weakest quarterly growth rate in six years.
Despite Australia’s over-reliance on China, it is actually our property bubble that poses the bigger risk to the economy, according to a Bank of America Merrill Lynch economist.
Economist Alex Joiner from Bank of America Merrill Lynch warns Australia’s dwelling price to income ratios are at levels “never before observed” while household debt to GDP is at a “record high.”
The comments follow ABS figures out Friday showing the average NSW home loan jumped $78,100 in a year due to accelerated price growth in Sydney. The rate of borrowing is outpacing growth in dwelling prices suggesting Sydneysiders are using the ultra low interest rate environment to borrow substantially more.
In boom town Victoria, the trend is same, as average home loans surged $61,700 up almost 20 percent and almost double the 10.6 percent increase in dwelling prices over the same period.
According to CommSec, the average national new owner occupied mortgage grew 15.4 per cent in the year, the fastest annual pace in 12 years. CommSec economist Savanth Sebastian remarked, “Not only is the size of the average home loan holding at a record high, but it is growing at the fastest pace in 12 years,”
Macquarie Bank economists predict Australian house prices will decline 7.5 per cent from March next year, impacting the broader economy. Recent ABS retail sales data has been strong in the housing boom states driven by the wealth effect. Along with banks Commonwealth and NAB, Macquarie expects Harvey Norman, CSR and JB HiFi to be hit from declining home prices.
» Sydney housing prices falling because of greater supply, RBA deputy governor Philip Lowe says – The ABC, 12th October 2015.
» Housing bust now the greatest recession risk, say investment banks – The Sydney Morning Herald, 13th October 2015.
» Average NSW home loan jumps $78,100 in a year – The Sydney Morning Herald, 9th October 2015.
» CBA and NAB to cop the brunt of falling house prices, says Macquarie – The Sydney Morning Herald, 13th October 2015.