Australian home owners are the most indebted in the world, but you need not worry. There is no evidence to suggest a collapse in prices any time soon. A survey suggests they are comfortably paying off more than they need to, and there is no reason to expect any interest rate advance with such a strong currency. This is of course in accordance with our view that the economy is doing well, and there is no problems on the near-horizon, unless you factor in a bird flu, plague, etc.
That is not to say Australian property is cheap. Its well-overpriced, but it will stay so, and might even put on modest gains in coming years, with some softness as interest rates rise. It is more probable that yields will rise faster than housing prices fall.
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Andrew Sheldon www.sheldonthinks.com
