Wednesday, Feb 03, 2010
Trouble down under..
The Market Oracle: Australian Housing Bubble About to Burst...
Today the Reserve Bank of Australia (RBA) unexpectedly held interest rates at 3.75%. No doubt this was in fear of the Australia's enormous housing bubble that exceeds the height of the bubble that long ago burst in the US. 20 economists predicted the RBA would hike. Not a single one predicted anything else. Fear in the board of governors over the pending crash is palpable. Prime Minister Kevin Rudd did not learn a single thing from the US and the disastrous policies of Greenspan. He gave one last goose to the housing market with $14,000 tax credits in a foolish attempt to stem the tide of the global recession that started two years ago....
Posted by rob @ 02:32 PM (966 views) Add Comment
10 Comments
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1. freemanphil said...
Australian govt is more healthy than the UK govt because of their commodities, but the Aussie consumer is more in debt than the British or American consumer. Rising Aussie rates are a bellwether on what will occur here when rates rise.
2. Sydneysider said...
I agree that there is a real bubble down under, but Australia is in a very unusual position - plenty of immigration by high net worth individuals, cashed up, and ready to pay whatever to get a house like the one they had in the oild country. Couple that with the recent loosening of restrictions on non-residents buying property - plenty of instances seen in Melbourne of Chinese investors piling in for 2-3-4 houses at a time and paying top dollar.
So - the pool of 'greater fools' is still unexhausted. I think that the only thing to p rick this bubble will be if China wobbles economically. As with the UK, immigration can bring in lots of money to prop up prices, to the massive detriment of natives.
3. luckyjim said...
Thanks for the article Rob. It's hard to find information about the Australian market.
4. Melbourneborn said...
This is a cliff face Australia is unfortunately about to jump over in a drunken stooper of greed. We fail to realise that the market is being massively inflated by those who need to park their money in the only asset base that hasn't melted down, yet. These investors are not silly they realise it is a pyramid scheme and are just taking advantage of the 'greater fool' theory before movning on elsewhere
When the market stalls and looks like faltering the exodus of these investors will be immense and will lead to a significant deterioration of prices in a very short time. It will be the bubble in reverse but the pain will be felt for a very long time.
It's amazing how we have this belief that we are bringing in wealthier immigrants than other nations and base this on the fact that our house prices are rising because of those who come here and pay anything. Anyone worth a pinch of salt as an investor does not come into a market that is clearly at it's peak and pay over the odds. Smart investors will be in the US and UK picking up long term investments that will clearly have the greatest growth in the decades to come. And if these immigrants are not moving their money here for investment then we are suggesting that we are attracting better, wealthier immigrants here as apposed to other nations on earth, it is laughable, and makes us appear like we are off with the fairies.
It's a shame as a nation we are so naive (or arrogant) to believe we are smarter than every other nation on earth and sustain this perfect economy while the world melts around us. Our pain is coming we are just to busy making it worse.
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