Smack in the face of a US housing bust and an enormous property bubble in Australia, Australian lenders are offering up to 105% mortgages.
It is amazing to see sheer stupidity played out on the assumption "It's Different in Australia".
Please consider Lenders back to throwing cash at buyers
Next month, non-bank lender Mortgage House will offer a home loan equivalent to 105 per cent of the property's value - the most generous deal since the global financial crisis kicked in three years ago.
The company also offers a 99 per cent loan-to-value ratio loan, which it launched last month, and says applications have been flooding in. "Demand is really strong; people are finding it difficult to save substantial deposits" Mortgage House CEO Ken Sayer said.
Last week, Westpac raised its LVR for new customers from 87 per cent to 92 per cent, reversing the cut it made back in January; while ANZ also last week raised the maximum LVRs from 95 per cent to 97 per cent for existing customers, and from 90 per cent to 92 per cent for new borrowers
Westpac denied it was fuelling house-price growth and said the falling unemployment and strong economy were behind its decision.
"This change reflects our growing confidence in the economic environment, reflected in the low level of delinquencies for this market segment," it said.
I tend to disagree. Yes, there is a bubble, but it will not burst, because, unlike the USA, Australia has a massive housing shortage. The prices will stay high.
ReplyDelete2.47
ReplyDeleteReal estate agents and bankers all talk this kind of confidence in la la land downunder just as they did in America .
"The price will stay high ".
Everybody knows housing value Never fall !
And can always find this or that reason or economist shrill to back their claims.
Americans should perhaps invest in Austraian Housing as the next big thing in the global recovery!
The truth is Australian housing is a time bomb.
Australia is only doing well in the GFC as a dependency on the “stimulated “markets of the Chinese economy for sale of its natural resources.
As China money printing goes so will Australia .
For a while as long as that lasts.
At least the OZ government has not yet been forced to nationalize the mortgage markets as with Fannie And Fredie in the US.
In the short term the big 4 banks (TBTF)that dominate Australia have a good captured depositor base for short term funds.
But the OZ banks are massively dependent on foreign sources for long term debt finance.
They lie and distort to hide the extent of the housing bubble.
Australians have trouble buying a new house at these prices it is unsustainable.
Even a small rise in interest rates will bring a huge price crash.
Australian Mac mansions are even bigger than the American version .
Not so many live in trailer trash parks.
The cost of the foreign finance supply ,its interest rates to the Australian banks is dependent on the kindness of the lenders.
For an analysis of these lies of the biggest bank and the share of the Australians incomes going to pay off these houses see the work of Keen at his website @
http://www.debtdeflation.com/blogs/2010/09/11/overseas-investors-the-commonwealth-bank/
P.S . Even “Crocodile Dundee” Paul Hogan now a multi-millionaire US Resident ,
after many tax avoidance schemes in remote offshore island and Swiss locations to avoid paying taxes in either the US or Oz has sold out of all his Australian property house and all.
A patriot Aussie beating the retreat with the loot.
Perhaps he is saying:
Now THATS a time bomb mate!
4:42
ReplyDeleteI believe you meant "economist SHILL".
"Shrill" will describe the screams of people when the whole thing goes bust.
2:47 is correct, for now, but Australia has one very large problem to deal with in the coming decade that isn't widely discussed. Unlike many other markets, a HUGE number of properties are owned clear by imminent retirees that will soon need to move into care or downsize into more manageable properties.
ReplyDeleteThey treat their homes are retirement savings, and I wonder not only what this massive inventory will do to the market, but also where the capital to purchase them will cone from.
This will
Not end well.
2:47 say's massive housing shortage, 2:03 say's massive inventory. shortage from? mass influx of immigrants? many homes burnt in wildfires? spike in the birthrate? or simple demand for it as an investment/rental not that anyone would actually live there hahaha
ReplyDeletelooking around the world I'd think to much inventory, USA, China, Dubia, area's of Europe, Canada all did the same thing
works until it doesn't, all good til it isn't, ponzi's fail eventually just don't get sucked in eh
"ponzi's fail eventually just don't get sucked in eh"
ReplyDeleteAmerican capital bailout money is flowing in too to keep this Australian housing bubble afloat.
After all american banksters can borrow at zero interest rates from the Fed and can export the money to Australia for a higher interest rate return.
Free profits for bailed out US bankers on the spread ,courtesy of the US taxpayer.
Thats a better rate of return than investing your handout money as bank reserves back at the fed ,that only pay a measly 1% free handout on bank reserves.
These bankksters are not so stupid to invest their free cash bailout money in loans to american business in a bankrupt US ponzi america .
America is a nation of suckers.
I am suspicious of Australian Banks. They are supporting inflated house prices and will continue to do so to prevent urgh delay the crash. If prices come down by 30-40% then these banks will collapse big time. The Australian govt will then start printing money and everyone knows what happens then. It would have been better to have faced the crisis like the rest of the world - and started rectifying the problem. We are on the verge of being the last country to take the 'blow' lick its wounds and start fixing things, rather like swallowing their bitter pills very late. Australia is not another planet.
ReplyDeleteThere is no housing shortage in Oz, but a massive housing bubble(affordable housing shortage sure, but not housing per se, plenty of housing on the market - look to falling clearance rates at auctions during spring). It'll be spectacular when it bursts. It'll make the US and UK housing bubble implosion look like a walk in the park.
ReplyDeleteNeed to flip that apartment soon-ish!
We need a major correction big time! 40% decrease at least to be in line with the long term average.
ReplyDeleteAs long as unemployment stays around 5% and interest rates don't rise dramatically prices will not crash. As long as the banks are healthy and don't tighten their lending standards - this is the key.
Even before the GFC australian variable home loan rates were around 9.5% and house prices in Sydney were still around the $500-$600K mark.
One thing is certain, Australians are now more exposed that ever before to "economic shocks" due to the amount of dept people have put themselves in.
The key to Australia having a "housing correction" is China. If the chinese economy busts then we are up Sh..t creek with no paddle.