Australia housing bubble

[zipping]

Originally Posted by Trump

It isn't about currency and forex transactions. Readily available, cheap (on the surface) bank issued credit is what has made it possible for house prices to rise exponentially. It has made it possible for anyone to buy into the market, regardless of their ability to afford the repayments now and into the future.

If the local currency was only issued by the treasury, it wouldn't be possible for irresponsible lending to occur and it would severely curtail speculative "investing" simply because the money wouldn't be there for it.

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up).

I do agree credit seems too readily available but banks are really engaged in a form of leveraging the same as they always have. I'm not sure that the leverage formula they use has changed in recent times are they not limited by RBA in terms of their exposure to available cash?

[Raptor]

Originally Posted by zipping

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up). ...

Isn't the US system different? Default (unable to pay) the mortgage and you simply hand in the keys to the bank and walk away, then the bank wears the consequences of reselling to clear the debt. In strayla the buck stops with the purchaser, not the bank, so no one ever defaults unless it's absolutely impossible. Also the reason no one ever wants to see the market drop, as they may have to sell and realise a loss.

How's the Aussie bank profits and share prices been these past few decades

It's a RORT.




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[Trump]

Originally Posted by zipping

If that's the case why isn't the US going through a housing boom? After all they have been at zero interest rates for a long period and actively pushing as much credit as they can into their economy (to prop it up).

This is because the US is buried up to its eyeballs in debt (at the personal, governmental and corporate levels).

- the US government has a declared debt of almost $20 trillion, with other unfunded liabilities running into the hundreds of trillions.
- personal debt (in the form of credit cards and other credit instruments like car loans and student loans) is close to $3.3 trillion.
- mortgages are running at $8.8 trillion.
- corporate debt in the US was $51 trillion last year.

You also have to remember, the sub-prime collapse in 2008 shook their housing market to the core, and it is yet to recover. However the debt binge since hasn't flowed into the housing market, it went into keeping the carcasses moving to maintain the illusion of an overall economic recovery.

Some sources for your perusal:

https://www.nerdwallet.com/blog/aver...ebt-household/

http://www.cnbc.com/2016/07/20/crexi...-trillion.html

http://www.usdebtclock.org/

[zipping]

I think its fair to say that easy credit is a contributing factor but I'm not convinced its a major factor. There would have to be a material change in lending practices to add fuel and there hasn't been. I believe that the proportion of business to home loans has changed in preference to housing loans so that would account for some extra demand.