Market Update

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There won’t be an Australian property crash anytime soon

Bubbles do not wait for a decade to burst. Thus any suggestion about Australian Real Estate being close to a bubble phase is a myth. In an article written for Property Observer, Terry Ryder illustrates (and effectively) why there isn’t going to be an Australian property crash. While doing so, he speaks in line with what Glenn Stevens suggested about the Realty scene here.

Glenn Stevens, the Reserve Bank Governor was quite clear in disregarding any possible collapse. It is not mandatory for an economy to suffer a reverse. Yes, Ireland, Spain and USA have suffered in recent past but there were specific reasons for such collapses. Overvalued economy has been the culprit most of the times. With USA, extremely high mortgage commitments, lending faults, and high rate of unemployment were among the major reasons. Which economy would sustain the weight of all these stress-points?

Property Bubbles do not hold as long

Australia has been maintaining the price trend for close to 10 years. If the bubble had to burst, it would not have held for so long. There is no reason to worry unless there is a 20% rise in prices in a very short time. At any rate, prices are determined by the Cost of Living Index. This is very high for Australia and it reflects on the housing prices.

Misplaced comparison

I feel that any comparison between USA and Australia is misplaced. Australia and USA are two different countries, following two different economic formulae and standing bipolar in terms of economic strength. Thus what was true for a CPI based economy (USA) may not be true for a price-asset inflation based economy. Reducing interest rates and keeping a check on Cash Reserve Ratio has only strengthened the Australian economy.

Do you think a 20% increase in prices is on the cards anytime soon?