The Truth Behind The Myth Of The Australian Property Bubble

Interest rates are running very low, especially since the cuts last week, but it does not give a single sleepless night to Commonwealth Bank chief executive Ian Narev. Alistair Walsh for the Property Observer writes that Mr. Narev is not bothered at all about the fiscal policies adopted by the RBA.

It’s just that the lenders need to be doubly cautious, not allowing bad loans to build up. If we succeed in doing that, we can easily keep ‘SubPrime’ like symptoms at bay.

RBA has full knowledge of what it is doing

The Commonwealth Bank chief also pointed out his extreme reliance on the governor and his board- “They think very carefully about a range of issues, they are absolutely aware of what effects different interest rate settings might have on the economy.”

Present rates only confirm to the concept of interest cycle

Banks are completely aware of how things can go wrong in an environment of low interest rates and the think-tank  is guarding well against any such possibility. Interest rates also follow cycles and if they exhibit a downward trend, it’s all for a reason, feels Mr. Narev.

Australia’s fundamentals firmly in place

He reaffirmed the doubting Thomases when he asserted that the economy can handle twice the levels of present unemployment and about 40% drop in house prices. That’s saying something!

You can read the original piece here.

Whenever rates come down disproportionately, they are always accompanied by talks of an Australian  property bubble. Think about it; are we anywhere close to a bubble? Forget the cynics and detractors- just give it a thought.

Many reasons why we are nowhere close to a property bubble

The median housing prices are sticking close to the long-term average.

Prices have already corrected once after the initial smell of ‘boom’ and are fairly stable now- just what happens in the Consolidation Phase of the property cycle.

There are still a large number of undervalued homes in the market, spread over all the hierarchies.

If it is a bubble at all, we are long since past its bursting time.

What are your thoughts on any Australian Property Bubble?