GMA Viewpoint: Australia Housing Bubble Starting to Deflate

Feb 2019

Australia has indeed been a lucky country, enjoying a 28-year stretch without an official recession.¹Employment has grown every year since 1994, corporate profits are at a record high, and migration to the land down under has grown every year since 1990 by roughly 140,000 people.² But cracks in the facade are beginning to appear.

With ubiquitous prosperity, cheap money, and tax breaks for home owners and investors, the Australian housing market had been on a record tear for nearly 30 years. After rising about 250% from 1989 to the early 2000’s, similar to the U.S., Australian home prices then more than doubled by the end of 2017 (even as U.S. home prices crashed and only recently recovered their mid-2000 highs). As a result Australia now sits on top of a housing bubble and, as is usually the case, on top of a credit bubble.

Cyril Moulle-Berteaux

Head of Global Multi-Asset Team

Sergei Parmenov

Managing Director

Australia Housing Bubble Starting to Deflate

¹This is partially a statistical artefact, resulting from the country’s enormous mining export sector. Australia actually experienced two “income” recessions, in 2009 and in 2015, when Gross Domestic Income (usually equal to Gross Domestic Product in most countries) suffered commodity price-driven hits.

²MSIM Global Multi-Asset Team analysis; Parliament of Australia.

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