Bubble down under

December 20, 2008 8:05 AM

I'm looking for econometric analysis of the Australian housing market and the medium-term risk of a crash in prices. I'm particularly interested in information about Canberra house prices. Something like Calculated Risk, with lots of data and layman-level explanations of its probable import, would be perfect.
posted by Estragon to Work & Money (3 answers total)

I'm not aware of anything comparable, but would caution you that stuff you do find is unlikely to be impartial. As a general comment, the circumstances in Australia are quite different to the USA, so a crash (say more than 25% short term depreciation) is less likely.
Namely:
- in the US, people can walk away from an underwater mortgage with no recourse (except a bad credit rating). In Australia, you still owe the money unless you go bankrupt, even if the bank kicks you out and sells the place for a loss (you owe the balance. Mortgage insurance covers the banks in case you default, not you).
- in AU more than 80% of mortgages are variable, so the RBA can get significant effects with interest rate changes. In the US circa 80% are fixed 30yr rates, so changes in rates have much lower impacts on household budgets.
- in Australia, the number of new houses being built (and that have been built in recent years) is less than the demand. In the US, there was an over supply.
- in AU in previous house price downturns, what tends to happen is prices stagnate until wages catch up to make the prices more affordable. See early 1990s for an example. This is largely, IMHO, because in tough economic times the government tends to offer higher relative support for those who are in tough times, propping up the market to some extent, and the repercussions of losing your house (bankruptcy) are quite severe, making people try awful hard to avoid a forced sale.
- In AU approx 1/3 of houses are owned outright, 1/3 are mortgagee occupied and 1/3 are rented. In a downturn, unemployment (the real driver of forced sales, and hence lower prices) tends to affect those who are renting disproportionately, as they tend to be lower income earners, but they don't have a mortgage to default on.
-in Au, less than 5% of loans are non-conforming (low-doc or similar, our version of sub-prime) in the US this was over 15%.
I don't know much about Canberra real estate, but in a big picture view, it wouldn't be unreasonable to expect federal government expansion, and I understand the commonwealth are the main drivers of the Canberra market.
posted by bystander at 11:47 PM on December 20, 2008

Its not the analysis you're after but past sales data is available for canberra is available on allhomes
posted by kaydo at 12:25 AM on December 21, 2008

Response by poster: Thanks very much for the information.
posted by Estragon at 6:15 AM on December 21, 2008