Bank Warning on Australian Property Prices
In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia’s housing “bubble” could be pricked should banks tighten credit or “loss-making” middle-class landlords start to sell.
He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments.
Compounding the problem is “ill-advised policy”, such as the government’s first home-buyers grant, which has combined to make Australian houses “40 per cent above fair value”, Mr Minack says.
“Buying an asset that’s over-priced never ends well,” he said. “The real return on residential property over the next decade is likely to be negative, in my view.”
No surprise, the supposed increase or spruiking of house prices has been based upon “population growth” spike due to labour demand till 2008, returning Australians, international students and backpackers (statistics and related info lags a lot…). But this has slowed dramatically with new student enrolments for 2011 “falling off a cliff”, permanent residency blocked for many due to “immigration debate” so they either not coming in the first place or are returning home, thus investors assuming they can rent out their properties should be very wary…..