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November 24, 2017 | Australia’s Housing Market Over 4 Times Size of Economy, US is Under 2

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Congratulations to Australia for having the biggest housing market relative to the size of its economy.

BusinessWeek notes the value of the Australia’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product.

Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.

“The risk is that it leaves the Australian economy extremely exposed, and a minor shock could become far more significant,” said Daniel Blake, an economist at Morgan Stanley in Sydney.

For How Much Longer?

Rapidly cooling house prices in Sydney and the sudden withdrawal of Chinese investors from the property market may lead the Reserve Bank to cut interest rates, according to investment bank Credit Suisse.

“Over the past few months, the Sydney housing market has not only cooled down, but has arguably turned cold,” Credit Suisse wrote.

“Over the past year, Chinese capital flows have fallen considerably, in part reflecting the impact of stricter capital controls.

“This fall foreshadows weakness in NSW housing demand in the year ahead.”

Mike “Mish” Shedlock

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November 24th, 2017

Posted In: Mish Talk

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