"Chinatown"-Official media of Chinese Australians

Australia is in the midst of a housing bubble driven by the largest credit in history. Once the bubble bursts, Australia's economy will suffer a devastating blow, and it is very likely that some big banks will suffer too!

This is the warning from Lindsay David. He is the founder of LF Economics and the author of "Australia: Boom to Bust" (Australia: Boom to Bust). He is also an expert on bad news of the Australian economy. But is his prediction true? Or have we heard of such an argument before?

Since his book was published last year, he has issued warnings that the property market crash is imminent and criticized the government, especially the finance, insurance, and real estate industries.

Since 1996, Australia has experienced a nationwide housing price surge. From 1996 to 2004, real prices and quality-adjusted prices soared by 121%. "This is the largest and most sustained price increase recorded since 1880."

He said that Australia today is obviously similar to the United States and Ireland before 2007. "Some people think you are crazy, but slowly, I am sure more people will agree with this view. However, by the time everyone realizes that there is a bubble in the housing market, it will be too late."

From 1996 to 2014, housing prices and mortgage debt have exceeded economic fundamentals (inflation, GDP, rent and income, etc.). "When you look at today, between 1996 and the end of 2014, household debt far exceeded the inflation rate, the ratio of the two was 10:1."

He also pointed out that assuming that new home buyers in Sydney save 30% of their income and pay a 20% down payment to buy a mid-priced house, it will take them six and a half years to save up. Buyers in Melbourne, Adelaide, Perth and Brisbane will spend 5.78, 4.30, 4.09 and 3.97 years respectively.

"House prices in Sydney are actually not as high as they actually are. Because of the shortage of real estate, everyone miraculously has A$90 in their pockets. Therefore, banks have to issue more loans to keep house prices high."

When new home buyers are unable or unwilling to apply for more loans than previous home buyers, the entire market will collapse. According to David, 2017 will be when the housing market will begin to collapse, and the collapse will begin in Western Australia. If the Perth housing market collapses, the lending capacity of the banking system will begin to suffer.

News compiled from "News Australia"


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