Strong fundamentals mean there is no Australian housing price bubble: ANZ

The Australian housing market is overvalued. Australia does not have a land shortage like most of the countries on the chart where property is high eg. Hong Kong and Singapore. It does not have a housing shortage like most of the real estate agents would like us to think. What Australia does have is an oversupply of land, a lack of affordable housing and a rental market that is demanding rents that have increased as a result of less people buying and renting instead. Its a matter of when the bubble is going to burst and it will burst, I recall the same pattern in the US and then in the UK. Its a myth that Australian property market is not going to fall. Its happening in China, they have 1000's upon 1000's of new high rise buildings that are empty with occupancy rates of under 20%.
The reason why there is shortage of housing and rental is due to the fact that prices are not affordable for the average Australian. Banks are offering mortgages of up to 90% LTV and this is a recipe for disaster. The building and real estate industry are the only ones that are benefiting from the boom and are continually trying to up talk the Australian property market. The downturn in Europe will eventually hit Australia as well as the high Australian dollar which will eat away at Australian manufacturing and the Australian service sector, again like it did in the US and UK, where we had a mass transfer of jobs to India and China. Its only a matter of time. This is what the US and UK had gone through and now its Australia that is heading the same way. Jobs will leave Australia this year as companies begin to realize that the cost of services and manufacturing are substantially cheaper abroad (now including the UK and US). This transfer of industry has already started with Toyota and Suncorp moving operations overseas. Made in Australia is going to be a thing of the past. The government needs to reduce interest rates in order to reduce the increasing dollar and also to make sure that the housing market remains strong or else it will only repeat the same mistakes that the UK and US have made. Sub prime mortgages in Australia are also becoming a problem with lenders lending over 90% LTV, this is ridicules and hence the IMF warning the big 4. The banks insure themselves against default by only providing borrowers a 80% LTV mortgage if they take out mortgage insurance which can cost upto $15,000.00 on a $500,000.00 property. This is absolutely ridculose and this will cause many problems for borrowers who see their deposits being eaten up. Mining is something that will also get hit as the Chinese beginning to take over continents like Africa and invest in countries such as Mongolia, Brazil etc for cheaper raw materials, this is inevitable as companies in China are working on margins as low as 2% due to the ever increasing costs of raw materials and rising dollar. Congo now imports over 80% of its raw materials to China and other new developing mining countries will follow.
The Australian government needs to cover its angles before it is too late. Don't think that we as a country are immune and when we are hit we will get caught out with our pants down. We need to act and act now. Getting the Australian dollar down before it begins to hurt the country further.
My advice to people is to reduce your exposure to property and if you can't help yourself , then invest in the US property market which I think has pretty much bottomed out. I remember when the US property bubble burst and being in the UK when people continued to say that it was not going to happen in the UK as they had a land shortage and that interest rates were low. The funny thing is a year later the UK property market plummeted. What happened to the land shortage that people spoke about and the low interest rates. Well that was a myth and it all comes down to affordability. My advice to people with property is don't over leverage yourself with property, stay in the place you are and don't up size for at least the next 2 years. If you have large mortgages then downsize whilst you can still get a reasonable price for your property. The reason why property seems buoyant over the last few month is because the building booster grant was supposed to come to an end and people rushed to get contract signed before this was going to happen (even though the government has extended this) and also the fact that in NSW stamp duty was going to be added to property sales and people rushed into buy property and hence a spike in property prices in Sydney. People, just cover your angle and don't over expose yourself to the market no matter what the real estate agents put out in the media. The banks will not help, they are already talking about not passing any RBA cuts in interest rates to borrowers as it costs them more to borrow (what a joke, how can it cost them more to borrow when the UK and US are able to borrow money at less that 2%.

The thing with the banks in Australia is that they just care about their profits and just don't want to pass on any interest rate cuts to lenders. I spoke to my bank manager at Suncorp and he confirmed that they would not pass on any cuts next week . I suggest new borrowers move to Bank of Queensland and A&B Bank who are more likely to pass on the cuts. The banks think that we are idiots. Why can people in UK and US get 0% APR for 9 months on credit cards and in Australia its unheard of! Work it out for yourself, we are lining the pockets of the big 4.

Less people are moving to Australia due to the high cost of living. I know several people who have decided not to move due to the high cost of living and the high AUD. This will prevail in the next few months.

I don't get the figures, you can get a average 3 bedroom house in the UK for around £60k and average wage per person is around £20k which means it would take a person 3 years based on salary. In Australia minimum house price is around $40k and average salary is around $50k which then equates to a payment back of 6 years. I don't believe the figures above take into account affordability of property v's income correctly.

I do wish ANZ would stay with one view - more recently they have been bears when it comes to residential property - and suddenly the market is well-supported! Leaving this change of view aside, it is good to see an article with analysis clearly showing the factors behind house-price growth and arguing against the bitter property doomsters that crave a crash. Just talk to those potential buyers that need a home - they badly want to get into the market - a factor that given Australia's housing shortage will not only prop up prices now, but see a return to robust house price growth in coming years. Bad luck doomsters - you've had your run with the European conditions etc - but you'll be proven wrong yet again.