Australian housing “bubble” popping in plain English

-Vizmato was just the editing software I used. I am not sponsored by them.
-Don’t use this video as investment advice. This is just my opinion only. If you are going to make a financial decision then go and do your own research on the market. Do not rely on this YouTube video.
-Also of relevance is that 2/3 of investor are currently negatively geared (they claim a loss on the investment to get various tax breaks). So the rents are not covering the cost of their investment.
-Additionally people are waiting for unemployment and delinquencies to rise as a sign that the housing market is about to turn down. In Australia at the moment the housing market is driving the economy not the economy driving the housing market so by the time the unemployment rises and delinquencies rise the bubble is well and truly popping.
-Of note is that Australia also has the highest private debt to gdp ratio of any major developed nation in the world. It is 225% and has been increasing at a very fast rate. I believe that the growth we have achieved in more recent years has been fuelled entirely by people taking on more debt. In fact rising prices (in excess of the amount incomes increase) has to be fuelled by debt. Most people buy houses with a loan. When house prices increase by 20% from a year ago but wages have only gone up 1% then the 19% extra growth is purely made up of debt. So the seller made an extra 100k in a year but that 100k is debt money that has been been acquired by the new owner. These 100k cash injections made up of debt have been what has been keeping Australia recession free since the end of the mining boom. This is why private debt to gdp is now 225% and why Australian banks have 60% of their loan books in residential loans (the highest exposure to housing in the world).

Submit a Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>