Last week I said I would do a better job of tracking the Australian housing market as my prediction for 2012 is that it is a bubble which will pop. Here’s what I wrote in January as Surprise #5 on my list of 2012 surprises:
Australia’s housing bubble will pop: I was just thinking about this in the context of Ireland. Ireland has seen prices in Dublin fall 65% peak to trough. That’s enormous, Japanese-style asset price deflation. No wonder Ireland is in a depression. In 2005, when the housing bubble was at peak, Irish house prices were up 192% in the previous 8 year period, second only to South Africa in developed economies surveyed by the Economist. By comparison, Australian house prices were up 114% putting them behind only South Africa, Ireland, Britain and Spain. I can’t speak to South Africa but those other bubbles have popped while house prices in Australia have climbed higher on the back of Chinese over-investment. if you think China will slow, as I do, that makes Australia extremely vulnerable – and makes its house prices and Australian shares vulnerable too.
Here’s what we just got data-wise. Except for the year-on-year data (which is admittedly poor) take the rest with a grain of salt since the m-o-m and q-o-q stuff is volatile. Still, it does look weak. The q-o-q nationwide is down 1.1% versus -0.5% expected and -0.7% last quarter.
The Age: Australian home values fell last month, adding to pressure on the Reserve Bank to slash interest rates to rekindle demand in the sector. Melbourne’s values led falls, and are now down 7 per cent from a year earlier. Capital city home values fell 0.8 per cent in April, offsetting slight gains in February and March, property analysts RP Data said. All cities, apart from Canberra, Adelaide and Darwin, experienced price falls.
I see this as confirmation that Australia is going through a rough patch. Will it get worse though? Depends on commodity prices.
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