The five reasons why there is no Australian house price bubble: CBA
Jonathan ChancellorAugust 12, 2014
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.
- 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 - 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. - 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 - 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. - 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 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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