Ominous signs in Australia

#27 … icle_click


RBA upped interest rate by 0.25% again today, for the third month in a row.

The biggest mortgage bank Westpac nearly doubled that rise, increasing their variable mortgage rate by 0.45% to 6.76%

Be interesting to see if the others follows suit.


I actually opened a current account with Westpac yesterday . I just wanted a credit card with a 4 grand limit . They were full on with pushing me to buy a house . Wanted me to meet the branch financial adviser that day . It was like being surrounded by sciencetologists trying to sell you a book for 800 Euro and your too polite to tell them to fuck off .


So, what kind of lending criteria are they operating? That’s the key to diagnosing a bubble.


Not quite throwing money at people but lax enough.

Ill dig out some data later.


Man, they got it all: … loans/all/

Equity release: … ity-loans/

Liars-Loans: … doc-loans/

Refi: … g-my-loan/

ARM/Interest Only: … erty-loan/

No deposit? No worries mate! … t-started/

Income multiples: …


Hmmm. According to their calculator I can “afford” 57% of my net pay on de mortgage. I don’t think so…


Yet but has been pointed out here before there seems to be genuine under supply in a number of places.

Plus the building approval data doesn’t show any major spikes that would indicate loads of units being built to satisfy speculator demand. Even in places like Perth where house prices have doubled in four years.

The ABS have data on this here.

Everything else screams bubble.


Also interesting.

As a proportion of the purchase price of their dwelling, over half (59%) of the FHBs with a mortgage had less than a ten percent deposit or no deposit. A further 22% reported having a deposit of between 10% and 20% of the purchase price of their dwelling, while 19% had a deposit of 20% or more.While the average deposit in 2007-08 was $45,000 (for those households who had a deposit), there were clear differences at the state and territory level. The average deposits in New South Wales ($61,000) and the ACT ($48,000) were substantially larger than in South Australia ($27,000) or Tasmania ($16,000). While some of these differences reflect variations in property prices between states and territories, as a proportion of the average purchase price of the dwelling, the deposits were still larger in New South Wales (17%) and the ACT (13%) than in South Australia (11%) and Tasmania (8%). … num=&view=



Thanks. Only a matter of time so.

I met a relation a couple of days ago who is just back from OZ for a fortnight’s holliers. Her version of the aussie attitude to the recession is “We had our recession. It lasted two months. Everything’s great again”


Those Westpac links are great. Apparently I can borrow 9 times my after-tax salary, and afford a mortgage payment of 64% of my take home pay! Oz here I come!


There’s an 8% over supply in general. Where those units are is another question. I know areas of Sydney that are suspiciously quiet despite having quite high density though.


They believe they had their property crash two years back too.


Just opened a term deposit at a rate of 6.8% for 12 mths in Australia. Reckon interest rates have a long way to go here or the banks got it horribly wrong. I’m predicting they got it wrong as I’m currently living in mining town in Northern Queensland and things are not booming up here!!!


860,000 empties according to the 2006 census. But a fair chunkc of those are holiday homes I would think. I think there probably is overhang but its not as severe here. Like I said, the building rates through the boom have not been super high.


According to the RBA that’s an 8% over supply. Those are 2006 figures, the vacancy rate in Queensland is much higher now I reckon. That’s an awful lot of holiday homes.


Raw data here … ByLocation


Here’s the demographics … -k8tf.html


A 15% rises in house prices driven by a 2.5% increase in population with the economy dependent on growth from immigration.

That doesn’t feel right.


Its tough to call.

Lending criteria is loose but unemployment is low and the economy is basically sound. Mortgage delinquency rates are tiny in Oz so no sign yet that any dodgy loans are coming back to bite the banks. In fact, the Central bank here like nothing more than telling people how well regulated the Aussie banks are compared to ones in the US and Europe. The IMF seem to agree with this assessment. The proposed new capital requirement thresholds have the major Aussie banks at between 6 adn 8 percent with 8 being the minimum.

Obviously, if demand for commodities from China dropped off there would be trouble but that doesn’t look like happening. WA, for example, has seen its unemployment rate drop from 5.8% to 5.6% in a month. And its not builders building for other builders. If you look at the housing starts they did not spike that much here over the last five years despite double digit increases in house rpices. Simple reason: its very difficult to get planning. High density is something that is really only permitted in the the inner cities. In the burbs its all three and four bedroom houses on 1/4 acre blocks.

The bubbliest markets like Perth experienced price drops in 2008. Since then interest rates have been slashed and the First Home Owners Boost introduced. the combination of the two brought tens of thousands back into the market including investors.Arguably, this merely temporarily arrested the decline and that with interest rates rising and the Grant removed prices will fall again. But despite all, unemployment looks like its going down not up and it is still not clear whether there is any real over supply. Regarding emigration, any of the data Ive seen shows that the plan is to take millions more over the next twenty years.We will see in 2010 how it goes.