The Australian housing market, which has been running for 55 years, is known as the "strongest housing market in the world." But figures show that the Australian housing market has fallen for 11 months in a row this year. The total price has fallen by more than A $36 billion! Is a long-rumored housing crash really going to happen?
1. Multiparty warning
In just three decades, Australia`s household debt-to-income ratio has soared from the lowest in the world to the highest in the world, one of the reasons Sydney is rated as one of the world`s overvalued cities.
Australian regulators have been warned to prepare "contingency plans for the collapse of the housing market" as a result of the "crisis situation" of many financial institutions.
(photo source: Zerohedge)
(photo source: Zerohedge)
According to the News.com.au, the latest in-depth assessment of Australia by the OECD (OECD) concluded that while the "current trajectory" of falling house prices would indicate a soft landing, the risk of some hard landings remained.
(photo source: news.com.au)
Salary stagnation and rising house prices have become major drivers of Australia`s housing crisis.
After a period of 5% to 15% overvaluation, the slowdown was widely welcomed.
Current data indicate a soft landing for the economy, but the OECD (OECD) said a soft landing is rare.
(photo source: news.com.au)
The OECD report recommended a contingency plan in the form of a "loss absorption system for financial institutions in the event of insolvency", including the controversial "bail clause".
They also pointed out that unlike the United States and the European Union, Australia`s law does not include terms that automatically convert some guarantee-free senior bonds and other bank deposits into equity in the event of a crisis.
"the lack of clarity will slow down the speed of solving the problem and is more likely to encourage financial institutions in disguise to take risks in the interest of recovery," he said.
The Paris-based Global Forum recommended that the Bank of Australia raise cash rates from record lows as soon as possible to prevent a "build-up of further imbalances."
(photo source: news.com.au)
The Bank of Australia`s most recent rate adjustment came two years ago, when the cash rate was cut to 1.75 percent in May 2016 and 1.5 percent in August of the same year. Since November 2010, the Bank of Australia has not taken official measures to raise interest rates.
The Global Forum also noted in its report that rising prices and household mortgage debt are the root causes of the fragility of the Australian housing market. A direct blow to the economy from a wave of mortgage defaults is unlikely. However, if house prices plummet, potentially negatively affecting consumer behaviour, exposure to bank stocks would encourage deleveraging. Combined with lower housing-related spending, this will put pressure on the economy as a whole.
2. Where to go for Australia`s economy in the Future
The ominous warning from the OECD comes after Guy Debelle, deputy governor of the Bank of Australia, sounded a warning call to Australia. He hinted that interest rates could be cut instead of rising next, and that controversial monetary printing could be used as a quantitative easing policy in times of crisis.
(photo source: Market Sanity)
As John Rubino recently pointed out, in the past few years homeowners have been able to solve problems in life by thinking, "at least my house is appreciating," almost everywhere in the past few years.
But now it`s over, and the wealth effect is starting to reverse. Homeowners see their net worth, or their net worth, slowly stopping growing and even falling frantically.
(photo source: Zerohedge)
In Australia, a decline of A $1000 a week is also enough to depress about 1% of the population. Depressed consumers are no longer enthusiastic about shopping, as new debt accelerates the decline in net worth.
As house prices fell, so did spending on discretionary spending. Australians will, of course, continue to go out and air-conditioning their bedrooms, but they will cut back on a range of savings from vacations, new cars and so on. Some of the debt-based economies will be affected. This would lead to a fall in the stock price, which would mean breaking the other leg of the ordinary citizen, making it even less likely that they would squander at will.
(photo source: Web)
Credit bubble capitalism depends largely on the state of mind, which makes it very fragile. And this vulnerability, I believe, will soon become everywhere.
Finally, the housing market may collapse, but life is not measured by a few houses.
You may be the next winner in life if you lose your horse, you don`t know what to do, keep your mindset, keep learning and exercise.
