The World's Largest Property Bubble
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The World’s Largest Property Bubble

Where does Australia’s housing market rank on the inflated list.

By Terry Christodoulou
Tue, Jun 22, 2021 3:17pmGrey Clock < 1 min

Australia’s housing market seems to be setting a new record every week, enjoying a prosperous surge in the last 12 months.

While cries of a housing bubble and a housing affordability crisis grow louder, a Bloomberg Economics Report highlights other international markets faring worse.

According to the report, the award for biggest housing bubble lands with pacific neighbours, New Zealand.

Other countries to top the list included Canada, Sweden Norway, United Kingdom and Denmark, with Australia down in 15th.

The study looked at each country’s home price to rent ratio and price to income ratio in an effort to decipher if recent price gains were sustainable, or if markets would be at risk of a correction.

It’s not only Australia that has seen prices rise rapidly, with global house prices boosted by record-low interest rates and a surge in stimulus from central banks inflating prices.

Bloomberg Economist Niraj Shah feels that there is a range of factors causing this global rise.

“A cocktail of ingredients is sending house prices to unprecedented levels worldwide,” Mr Shah said.

The Bloomberg report also points out that in many countries price ratios are now higher than 2007-2008s Global Financial Crisis, indicating that current prices might not be sustainable in the long-term.

See the full list below:

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Amid looming rate rises, there are reasons to be cheerful as mortgage holders head into 2023

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Mon, Feb 6, 2023 2 min

Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet this afternoon for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggested yesterday that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This could present the RBA with the chance to put further rate rises on hold for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the 2022 December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.

Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.

“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said. 

“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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