Australia is amidst a severe property bubble and it can’t be ignored, warns Lindsay David, the author of Australia: Boom to Bust. He argues that “toxic levels” of private sector debt infused by the big banks has inflated property prices to dangerous levels.
It's "the sheer size of the loans relative to the incomes here" that troubles Mr David. "No one in the Western world has ever done what we are doing,” he told Fairfax Media
David presented his book to David Murray himself, at the Financial Systems Inquiry open forum last week.
His research reveals that the median house price to income of Sydney is nine times, compared to 6.2 times in New York and 7.3 times in London, Fairfax reports. Even Adelaide is more expensive than New York on a price-to-income basis.
Not everyone is worried about a bubble emerging, though. An economist for the Housing Industry Association
, Diwa Hopkins, mentioned
earlier this month that the property market may be showing signs of cooling.
“While it’s too early to call a trend, the signs are mounting that price growth is easing back to a more sustainable pace. Annual growth reached what looks to be a cyclical peak rate of 10.9% in the March 2014 quarter. This rate eased back to 10.1% per annum in the June quarter,” she said.
According to official figures
released last week, the construction of new residential housing has also increased in the June quarter, which will aide a downwards push on property prices.