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Aussie housing bubble nowhere in sight: Moody’s


 housing bubble hand2In spite of high house prices and household debt, a global study has put Australia at low risk of a housing correction.

A Moody’s Investor Service study of 20 advanced economies has ranked Australia as the second-lowest risk of a property price crash, the Sydney Morning Herald has reported.

The study examined the relationship between house prices and rents, the SMH reported. According to Moody’s, when rising house prices fail to cause a subsequent rise in rental prices, it could be an indication that consumers have unrealistic expectations of property price growth. Moody’s such unrealistic expectations could be indicative of a housing bubble.

"Countries where house prices and rents are out of balance, and adjust slowly, are at most risk of detrimental economic effects from high house prices," the report said.

Is there an Australian property bubble?

Moody’s ranked Norway as the country most in danger of a bursting house price bubble. The country has seen low interest rates coupled with government stimulus. This, coupled with an 85% home ownership rate, meant that a price correction could have a “wide adverse effect on the economy, financial stability and credit conditions,” the report said.

Belgium and Germany were also rated as high risk markets, while Japan was the only country ranked as a lower risk than Australia.

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