Aussie housing is ‘unpopped bubble’

22/07/2010

Prominent US Jeremy Grantham said Australian house prices would inevitably fall because the housing market is an ‘un-popped bubble’. ''Further decline in house prices in the US is probably more than a 50-50 bet, and in the UK and Australia is nearly certain,'' said Mr Grantham, chief investment strategist of Boston-based fund manager GMO, in his quarterly note to investors.

Mr Grantham said economic growth in Australia, along with Canada, looked ''okay'' but both economies were propped up ''by raw materials and, so far, un-popped housing bubbles". The Reserve Bank said in May that Australia didn't face a ''credit-fuelled speculative boom'' in housing but did warn homeowners not to count on capital gains for their wealth creation.

Home prices rose by an average of 1 per cent a month over the year to May when price growth slowed to 0.6 per cent for the month. Economist magazine this month said a "fair value" analysis of global property shows Australian property the most overvalued of any of the 20 countries the publication tracks.

Source: Sydney Morning Herald