Just a bit of food for thought for those of you worried about property prices ,values etc.
These are a few of the predictions I made some time ago and now being spoke about by some of the leading economists across the country.
According to The Economist, Australian housing is now 56.1% overvalued based on the long run average of price to rent ratios. The price to rent ratio is seen as similar to that of the PE (price/earnings) ratio used to value shares.
Australia is in 1st position on the leader board of overpriced property. In close 2nd is Spain at 53.4%, Hong Kong at 49.1%, France 39.7%, and Sweden 37%.
According to Edward Chancellor, author of the book titled Crunch Time for Credit (2005) and a member of US Investment Firm GMO’s asset allocation team, Australia is in the midst of an unsustainable housing bubble that could burst at any time.
It’s hard to argue with these claims when reports out today show Australian house prices have surged 20 percent this year, the most since the ABS started the house price series in 2002. Melbourne recorded an unsustainable gain of 27.7 percent followed by Sydney at 21.0 percent. This comes after reports in February that wage growth fell to it’s slowest pace in a decade last year.
M Chancellor told The Australian, he estimates Australian house prices are more than 50 percent above their fair value, something he cites as a once in a 40 year event. “If house prices were to revert to their historic long-term average (ratio of average price to average income) they would fall quite considerably.”
for more detailed info and graphs go to www.whocrashedtheeconomy.com