Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

Property crash predictions ‘wide of the mark’

By Staff reporter · March 01 2016
Reading:
egg
egg
egg
Property crash predictions ‘wide of the mark’

Property crash predictions ‘wide of the mark’

author image
By Staff reporter · March 01 2016
Reading:
egg
egg
egg

One of Australia’s leading economists has responded to dire predictions for Australia’s property market and recent reports claiming that Australian banks fail to check proof of income when processing loan applications.

In a research note published on Saturday, AMP Capital chief economist Shane Oliver responded to last week’s Big Short reports – saying foreign hedge funds and various commentators have been predicting a property crash for more than a decade that have been “wide of the mark”.

“Australian home prices are likely to see yet another five to 10 per cent cyclical fall at some point in the next few years and, yes, home prices are overvalued, posing a downside risk, but a 50 per cent crash is unlikely,” Mr Oliver said.

“The latest crash call aired on 60 Minutes has raised nothing that wasn’t already well known,” he said.

“Australian property is no more overvalued than it was a decade or so ago. The ratio of household debt to income is about the same as it was prior to the GFC, but interest costs have collapsed and there are no signs that Australians are having trouble servicing their debts.”

Advertisement
Advertisement

Mr Oliver admits there has been “some easing in lending standards”, but he does not accept that Australian banks are not regularly checking for proof of income when processing loan applications, “particularly with APRA breathing down their necks on ‘bubble’ worries”.

“More fundamentally, Australia has not seen the growth in low-doc and sub-prime loans that don’t even require people to lie about their lack of income, which were central to the US housing crisis that triggered the GFC,” he said.

“To get a crash we will either need a massive rise in interest rates, which is unlikely because the RBA is not stupid, or a deep recession in the economy, which seems unlikely," he added.

“Seems to me that some people have just seen The Big Short and want to be film stars – or least are desperate to find the next big short. The trouble is that shorting Australian banks is becoming a rather crowded trade.”

 

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article
author image

About the author

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Copyright © 2019 MOMENTUM MEDIA