Australian House Prices—again

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Australian House Prices—again

Click here for this post in PDF (Debtwatch Members; CfESI Members);

Click here for the data in this post (Debtwatch Members; CfESI Members)

Mortgage debt is by far the largest component of debt in Australia today—government debt, which is the focus of political debate, is trivial by comparison (a quick caveat though—finance sector debt may be larger again than mortgage debt, if this claim, sourced from Morgan Stanley, is accurate—since it shows Australia’s aggregate private debt ratio as almost equal to the USA’s).

Figure 1

The household debt to income ratio may have topped out now, after growing fivefold in the last two decades. Figure 2 shows the ratio of household debt to disposable income, which peaked at 149% of disposable income back in late 2008. Despite the enticement into debt given by the First Home Vendors Boost, aggregate household debt never exceeded this pre-Boost peak as a percentage of disposable income, since the fall in personal debt outweighed the rise in mortgage debt.

Figure 2

This huge rise in household debt compared to income has more than offset the falls in interest rates that occurred since the 1990s. The perennial argument from property spruikers that the rise in debt has simply been a rational reaction to the fall in interest rates …

Sent from Peter Newbury’s iPod.Alternate email: pjn

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