House price meltdown fear The Age, Australia - Mr Lawless predicted a 5% drop nationally, with the mortgage belt faring much worse than inner-city home owners. CommSec economist Savanth Sebastian said ... Australian house prices to fall 10% in the next year |
The world’s financial storm has swept through Australia and New Zealand this week amid mounting signs of contagion across the Pacific region.
Financial shares were pummelled in Sydney on Tuesday after investor flight forced National Australia Bank (NAB) to slash a £400m bond sale by two thirds.
The retreat comes days after the Melbourne lender shocked the markets by announcing a 90pc write-down on its £550m holdings of US mortgage debt, an admission that it AAA-rated securities are virtually worthless.
In New Zealand, Guardian Trust said it was suspending withdrawals from its mortgage fund owing to "liquidity difficulties in the market".
A recession is the biggest threat to Australia’s real estate market.
ARE house prices going to crash in Australia as has occurred in the US? Based on West Sydney University economics professor Steve Keen’s regular Debtwatch newsletter, the answer is probably yes.
The doubling in real terms in house prices in the past decade is a bubble waiting to burst. According to Keen, the bubble is based on speculation financed by debt. Keen claims it is effectively a "Ponzi scheme" where dividends are paid out of new rounds of capital injected into the scheme instead of the non-existent profits. The scheme collapses when there are no new investors to pay the dividends.
Most of the expected losses from the US sub-prime mortgage exposures appear to have been taken and Australia is better placed than most countries to withstand the current economic turmoil, federal Treasurer Wayne Swan says.
But an International Monetary Fund (IMF) report – released overnight – warns global financial market conditions continue to be fragile.
"The report highlights the difficult global financial conditions we face and underscores the need for reforms to strengthen the global financial system," Mr Swan said in a statement.
The International Monetary Fund (IMF) says there is no end in sight to the credit crisis gripping world financial markets, predicting that banks are in for more pain as mortgage defaults soar and economies slow.
With revelations still fresh about the extent of exposure for Australian banks NAB and ANZ, the IMF has issued a particularly gloomy assessment of the US economy in its latest global financial stability report.