The five reasons why there is no Australian house price bubble: CBA

The five reasons why there is no Australian house price bubble: CBA
The five reasons why there is no Australian house price bubble: CBA

The Commonwealth Bank has pinpointed five reasons why house price bubble signs are not evident in Australia.

It listed the five factors that typically characterise a house price bubble.

It then gave their reasons why they are not evident in Australia. 

  1. Unsustainable asset prices, but the current situation is:

    Prices supported by the excess of demand over supply
    Australia’s population continues to grow at above average rates
    Supply-side responding – lift in construction underway

  2. Speculative investment artificially inflates asset prices, but the current situation is:

    Investor interest is a rational response to low interest rates, rising risk appetite and the pursuit of yield.

  3. Strong volume growth driven by relaxed lending standards, but the current situation is:

    Already stringent standards tightened through GFC
    Minimal “low doc” lending
    Mortgage insurance for higher LVR loans
    Full recourse lending

  4. Interaction of high debt levels and interest rates, but the current situation is:

    A high proportion of borrowers ahead of required repayment levels
    Interest rate buffers built into loan serviceability tests at application
    Housing credit growth remains subdued – at the bottom end of the range of the past three decades. 

  5. Domestic economic shock trigger for price correction, but the current situation is:

    Respectable Australian economic growth outcomes
    Relatively low unemployment, high quality lending, low arrears

Source Commonwealth Bank June 2014 results presentation

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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