Australian Housing Bubble is Next
Australia has ridden its housing bubble far longer than expected, thanks to China’s response to the global financial crisis—an enormous building boom. But although the Australian boom-bust cycle lags years behind the rest of the world, the same factors of excess credit and cash and artificially manipulated interest rates are in play, and the same outcome is inevitable.
The Australian housing bubble now poised to pop is no better than the housing bubbles that appeared in other nations as the world gorged on excess credit relative result from the continual government-directed distortion of free markets.
The end of the Australian bubble is drawing closer, but as those fond of the Down-Under know, everything hits late there. Here is why the Aussie bubble is temporally displaced from the onset of the great financial crisis of 2008, and the current factors leading to the upcoming popping.
Australia is Always Late
Household disposable income in Australia has risen briskly over the past few years, from $21,528 per capita in 2001 up to $37,180. This is one of the most important supporting reasons for the perpetuation of real estate prices that average over $400,000 for a median-priced home.
Aussie home prices have flattened out, with direction mixed in 2012, after falling 3.8% in the previous year. But without insane debt to income ratios, or guarantees of perfect AAA ratings, it seems as if there will not be a pop, ever!
Why is it that Australian incomes are booming, enabling the
If Australian incomes were supported by China’s call for state-owned enterprise debt spending, then the impending explosion of the Chinese credit bubble will end any remnants of high times Down Under.