Tuesday, September 6, 2011

High End Taking the Biggest Hit in Australia

The difference between the average price decline and that on the high end has gotta hurt. As our shameless salesman the other day insisted (as a way of soothing concerns of all things) 75% of mortgage debt in Australia is held by the top 40% of households. Well, that segment is just as capable of being overextended as the next family, given banks' desire to loan the maximum possible to every customer that walks in the door.

Rather than provide stability, this high end creates volatility, more risk to the banks over a shorter period of time. The other 60% of Australian mortgage holders, with their paltry 25% of the mortgage debt, represent far less of a risk to balance sheets.

Million dollar home sales continue to fall away
Change in Dwelling Price by Dwelling Value Chart from RPData Blog


jesse said...

Remind me again what Australia's inflation rate is? 3.5% or something? In real terms the drops are worse apples-to-apples to the rest of the developed world.

Oh and if inflation, for some bizarre reason, ever drops to zero (I know I know it will never happen...) then those -10% YOY declines won't seem so bad. :P

GG said...

The CPI for June was 3.6%.

I fully expect Australia to see the same kind of asset price deflation as the U.S. did, with a huge hit to consumer buying power across the board, so it could drop. It did in 61-63 when house prices fell 10% or so.

Oh, you're reminding me that you asked about seasonality a while ago. Australia is just heading into their big spring selling season right now.