Australian housing market slumps toward potential crash
17 October 2018
Amid the growing global economic turmoil and uncertainty, statistics, studies and comments published in the financial press are drawing attention to the fragility of the Australian real estate market and the immense social and political implications of a severe slump.
After close to a decade of soaring house prices in the major cities, Australian households are among the most indebted in the world, with household debt compared to income close to 200 percent. Millions of families have been compelled to borrow staggering sums to achieve the so-called “Australian dream” of home ownership.
At the same time, speculators have gambled that the purchase and resale of real estate offered greater capital gains than stocks and other investments. The major Australian banks became among the most profitable in the world by facilitating a speculative frenzy, borrowing at near zero interest rates internationally and lending at higher margins in Australia.
By the end of 2017, housing in Sydney and Melbourne, the country’s largest cities and the focus of real estate speculation, was ranked as among the “least affordable” in the world. Sydney was ranked as the second worst after Hong Kong, with median house prices nearly 13 times median household income. Melbourne was the fifth worst internationally, with prices close to 10 times higher than what the median household earns in a year.
In August 2018, there were 613 suburbs nationally where the median house price was over $1 million—double the number just five years ago and overwhelmingly in Sydney and Melbourne.
Rampant profit-gouging is rife in the financial industry, some aspects of which were revealed during the recent Royal Commission….