Housing bust bigger threat than China

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.


  1. At average net income of 40k per year, if one borrows 600k over thirty years that loan becomes 1.5 million. That means almost 40 years of total earnings to cover that loan. This is the slow murder of our children who are the young adults these days looking for a fair go. Most of these young people work really hard. They do NOT deserve a kick in the face, with steel capped boots, when they are down. As we all know, houses in OZ, are built for 100k materials and labour included. So why are they not being sold for 200k with no interest charged. Because the greed of the 1% has no limit. Our elite have no idea what this nation has become in the last 30 years. This inequality is intentional and cold blooded.

  2. America is not recovering despite best efforts to portray the opposite, Chinese economy tanking ever so slowly, and the Australian economy not far off recesssion with Australian media pushing the line more and more that we are close to a property bust.

    Yep, its a little late, but its all unfolding exactly as has been predicted.

  3. @1
    What you have stated is 100% correct, but unfortunately the top 1% (which comprises of the large corporates and of course the banksters), are running the show, not our so called “elected leaders”, who are nothing more than a bunch of puppets.

    Like the old saying goes:

    “Money is the root of all evil”.

  4. @3 It’s actually “the love” of money that is the root of all evil, but I suppose I’m being pedantic. A toxic mix of greed, laziness and stupidity is the problem, not the means of exchange of goods – just a thought.

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