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Property bubble fears grow as IMF says (Aust) houses overvalued
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Property bubble fears grow as IMF says (Aust) houses overvalued
By Stuart Fagg, ninemsn Money 10/08/2009
Fears of a property bubble are growing in Australia as house price
Australian house prices are overvalued by around 20 percent and the size of the average mortgage has reached an all time high, fuelling fears of a property bubble.
In its latest assessment of the Australian economy, the International Monetary Fund (IMF) has warned that Australian house prices are overvalued by up to 20 percent and that low rates, government subsidies and ongoing strong immigration will continue to push house prices higher.
However a "sharp fall in house prices" remains a risk. The problem is being exacerbated by a growing gap between household incomes and house prices, the IMF said.
The Reserve Bank of Australia recently flagged its concerns that a combination of easy credit, low interest rates and lack of supply could create a property bubble which could burst in the longer term, causing a collapse in house prices. Concerns over a bubble are being exacerbated by frenzied activity in the property market.
The average value of a new mortgage in Australia has risen to its highest ever level as property investors return to the market, according to the country's biggest mortgage broker.
The average new mortgage lodged in Australia rose to $354,137 in July, eclipsing the previous record of $353,223 in October 2008, according to data from mortgage broker AFG released yesterday.
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