Banks and real estate professionals have a vested interest in painting our property market picture in colorful hues. Foreign investors on which our banks rely so heavily draw from experiences in their own countries and paint a different picture.Debt to disposable income has been improving and the household saving rate has made great gains, but will this rescue the bubble from a crash? It depends on what percent of households are actually participating in the de-leveraging. Real estate is priced on the margin. Take the wildly optimistic view that 80% of house-owning households are getting their personal balance sheets in order. Twenty percent in distress would still put severe downward pressure on the market. And the number of households participating in higher savings is probably closer to 50% than 80%. But I don't have the data to know.
In a recent interview with the Australian Spectator, bond king Pimco’s head of Australian operations said that his colleagues in the United States believe the Australian property market is the most overvalued market on the planet.
The gradually growing income gap also contributes to these numbers improving, a few high net worth individuals saving more makes the average look better for all. So, while these improving numbers are a good sign, they over-simplify the picture too much to let us know if Australia is off the hook for a crash.