Future Fund chairman David Murray says Australian housing overvalued
The Future Fund chairman David Murray, who served as Commonwealth Bank of Australia chief executive for a decade until 2005, has warned that houses are overvalued and predicts that prices will at best stay flat for some time.
He believes house prices are higher than justified by income levels, but says this does not mean prices will collapse.
Instead, prices and incomes would come back into line over several years, he told the Australian Business Economists’ annual forecasting conference.
“The lending system for housing has resulted in a house price which is higher than it should be,” he said in answer to a question reported by the Australian Financial Review.
“I believe that will be worked through by stabilisation of house pricing and rising increases in incomes and hopefully that’s the outcome.”
Murray said in hindsight he saw that banks were funnelled into home lending by prudential standards that required them to hold much less capital in reserve against home loans than for other loans.
Banks were unlikely to face major losses on home loans based on historical experience but it was a concern that they needed to refinance the home loans on international markets, which were showing signs of stress, Murray added.
