Housing Bubble

House prices in Australia’s major cities have been ballooning for over a decade. It used to be that homes selling in excess of $1 million were solely from the luxury end of the market. But in Melbourne and Sydney, sales in excess of $1 million are commonplace these days.

But in the last year, you’ve probably noticed that the market is starting to turn. Property prices in our metropolitan hubs are starting to fall.

If things continue on this track, we could be setting ourselves up for a potential housing collapse.

Here’s how it could unravel.

Years of low interest rates in Australia have succeeded in inflating home prices in many of Australia’s capital cities. But at some point interest rates must normalise.

We’re seeing interest rates rise overseas, and as Australia’s economy gathers steam, the Reserve Bank may be forced to put on the brakes and start to increase interest rates also. After years of these low rates, the property market could be in for a shock. Particularly if housing prices continue to weaken…

Australia’s housing bubble

Higher interest rates lead to higher monthly repayments. As most Australian's mortgages become more unaffordable, households will be forced to limit their spending, particularly on discretionary items.

This in turn affects the wider economy. As more and more of the weekly wage gets lost into paying the mortgage, there’s less money left over to fund other areas of the economy.

Business starts to slow and unemployment starts to rise. Then the cast is set and property will start to fall.

The real problem will be when the value of the home falls below the level of the loan outstanding. Which as we’ve been seeing recently, is a likely possibility.

In that event, the banks will be in a lot of trouble.

And we may be in for a repeat of the catastrophic crash in 2008.

Affordable Housing Is within Our Grasp

We’ve heard so much about 3D printing in recent years. Well now it’s being applied to housing. This is not science fiction anymore. Companies are making and delivering 3D printed houses to the market place, now.

What We Can Learn from Japan’s Property Market

Back in the 1980s, Japan went through a period of record low interest rates that fuelled an asset bubble to record highs…sound familiar? The bubble pushed the stock market and real estate prices to new heights…and then it burst in 1992. It was devastating.

The Special Structure of Real Estate Investment Trusts

REITs need to have the bulk of their assets and income connected to investments in real estate. They must invest at least 75% of total assets in real estate and cash. They need to derive 75% of gross income from sources related to real estate, including rent.

Have Banks Put their Needle in the Housing Bubble?

Normally, interest rates are to blame when property prices head south. With each rate move higher, more would-be buyers decide that they will sit on the sidelines. It also makes it tougher for those already in the market. However, property investors can’t blame the RBA this time.

Why The Aussie Property Market Won’t Crash

Is Aussie property really in a price bubble? Well, yes and no. I say yes and no because property has some unique characteristics that make it hard to compare to stock or cryptocurrency bubbles. Let’s have a look at a few of them now.

The Analyst Who Cried Crash

I have no doubt that when Aussie property prices crash, it will be a specular fall. But right now, I can’t see that happening for a few more years yet.
Money Morning Australia