Investors fear housing bubble will pop
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The great Australian dream ... but the housing market remains tight and prices high. Photo: Peter Braig
WHEN the chief executive of the Commonwealth Bank, Ralph Norris, recently caught up with investors in New York, talks soon turned to the topic of the heady Australian housing market.
After a correction in housing prices around the world, Australia and Hong Kong remain the standouts where housing markets are booming.
For the investors in the nation's banks - particularly the Commonwealth Bank and Westpac, which are the most exposed to the housing market - the prospect of a correction in prices is nerve-racking.
Home owners no doubt welcome rising property values, but overheated markets bring about other dangers. The biggest is that asset bubbles face a real risk of popping, as seen in the US and British housing markets, which can also lead to pain for overextended owners.
At the same time high prices and low rental yields act as a disincentive to increase the supply of rental properties, while would-be home owners are priced out of the market.