{"id":9166,"date":"2015-06-17T06:11:49","date_gmt":"2015-06-17T11:11:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=9166"},"modified":"2015-06-17T06:11:49","modified_gmt":"2015-06-17T11:11:49","slug":"australias-housing-bubble-the-mania-down-under","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=9166","title":{"rendered":"Australia\u2019s Housing Bubble\u2014\u2013The Mania Down Under"},"content":{"rendered":"

Australia\u2019s Housing Bubble\u2014\u2013The Mania Down Under<\/a><\/h3>\n

Australians are being \u201cirrationally exuberant\u201d and borrowing too much to invest in housing, exposing the economy to financial shocks, global bond fund giant PIMCO says.<\/p>\n

In a detailed statistical study that compares Australian borrowers to those in other countries, PIMCO researchers found that Australians\u2019 decision to borrow is driven by falling interest rates and rising house prices \u2013 not economic fundamentals that reflect the health of the economy like employment.<\/p>\n

In the US\u00a0wages and\u00a0other measures of economic health drive people\u2019s\u00a0decisions to borrow.<\/p>\n

The world\u2019s biggest bond investor\u00a0said Australians\u2019 focus on capital gains and cheap credit \u201cmay not be sustainable or linked to the productivity of the asset.\u201d<\/p>\n

Australians also appear to be \u2018trigger happy\u2019\u00a0about debt \u2013\u00a0they respond\u00a0far quicker than other borrowers to changes in interest rates and asset prices. They\u00a0start borrowing more after\u00a0only six months of increases\u00a0in house prices compared with a year\u00a0in the US.<\/p>\n

\u201cHouseholds are exhibiting irrational exuberance because they are placing little weight on broader fundamentals like unemployment that may be more representative of future incomes or asset price returns, increasing the likelihood of asset price bubbles,\u201d the report released by the bond fund on Wednesday said.<\/p>\n

Australians react faster and \u201cmore vigorously to a shock in asset prices or mortgage rates\u201d which makes the economy more vulnerable to an external shock, such as a sharp slow down in China\u2019s economy or another financial market sell-off, the report said.<\/p>\n

\n

The conclusions may bolster those who\u00a0believe parts of Australia\u2019s property market are into a bubble,\u00a0including Treasury secretary John Fraser<\/u><\/a>, and put pressure on regulators to take action. A sharp fall in property prices could hit the big banks, which borrow billions each year from overseas investors like PIMCO.<\/p>\n

\u201cThe key point is that the speed which Australian households reacted to changes\u00a0in housing assets and mortgage rate was much faster,\u201d the researchers said.<\/p>\n<\/div>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

Australia\u2019s Housing Bubble\u2014\u2013The Mania Down Under Australians are being \u201cirrationally exuberant\u201d and borrowing too much to invest in housing, exposing the economy to financial shocks, global bond fund giant PIMCO says. In a detailed statistical study that compares Australian borrowers to those in other countries, PIMCO researchers found that Australians\u2019 decision to borrow is driven […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[6422,41,5979,2120,195,406,2340,5824,5020,6421],"class_list":["post-9166","post","type-post","status-publish","format-standard","hentry","category-economics","tag-asset-price-bubble","tag-australia","tag-contracorner","tag-david-stockman","tag-debt","tag-housing-bubble","tag-housing-market","tag-irrational-exhuberance","tag-mania","tag-pimco"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9166","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9166"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9166\/revisions"}],"predecessor-version":[{"id":9167,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9166\/revisions\/9167"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9166"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}