No one is paying a whole lot of attention to Australia right now because of the massive busts in the US, the UK, Spain and Ireland. But, Australia has had a property boom as well. And this boom looks like it’s coming to an end.
IN further evidence that the property market has been spooked by rising interest rates and an uncertain economic outlook, it has emerged that the nation’s largest mortgage broker last month sold 22 per cent fewer mortgages than it did in the same month a year ago.
Australian Finance Group, which accounts for 10 per cent of the national market, with a mortgage book in excess of $50billion, yesterday declared a”mortgage recession” following two successive quarters of falling sales.
Last month, AFG sold 5939 mortgages, an 11 per cent drop from May when it sold 6691, and 17 per cent down from April, when 7125 sales were made. In June last year, it recorded 8195 sales.
AGF spokesman Mark Hewitt said average mortgage sizes were still increasing because borrowers needed to take out bigger loans to cover the cost of housing. Where the average loan was $317,000 a year ago, it was now $341,000.
–We’re in a ‘mortgage recession’, The Australian, 4 Jul 2008
What is clear is that the credit crisis is global. Any and all markets that had previously witnessed heady gains should feel the headwinds of global inflation, higher interest rates and a credit growth slowdown.
Countries where this slowdown should be gathering steam include Canada, Australia, New Zealand and South Africa, all of which experienced fairly high rises in the property market. These countries are also heavily leveraged to the commodities sector and have benefitted from high commodity prices. However, if commodity prices fall, all bets are off.
Also see my post Naysayers, the housing bubble was obvious, linking to an article from the Economist attesting to overvaluation in a number of different markets.