Fed’s Fisher: Chinese driving Oz house prices

ScreenHunter_06 May. 06 09.27

From the newly free and spruikaliscious BRW:

Australian house prices are being fuelled by Chinese buyers, says the president of the Federal Reserve Bank of Dallas, Richard Fisher, but as long as Australian households don’t over-leverage, house price growth shouldn’t be a worry.

…Fisher says Australia’s housing market is “robust” due to “unique factors” where Chinese buyers are flocking to Australia in large numbers. “I’ve been watching the weekend auctions in Sydney and Melbourne – they are record auctions now.”

“You have a robust housing market. Even though Reserve Bank of Australia hasn’t cut the cash rate below 2.5 per cent… you have unique factors. I’m staying at the Crown Towers. I’m one a few non-Chinese non-Australians. I see what’s happening. I know one of things that drives the housing market here are newly wealthy Asians buying houses and flats for students and their children.”

Asked whether he was worried about the high level of household debt in Australia, he said people taking on higher loans “all ties back to easy money.”

“I don’t know the specifics of the Australian market, but leverage works very well going in one direction and always comes back to bite you in the other direction. I’m sure the RBA and others are watching this.”

And the article contains this howler, just to show it really is ALL GOOD:

Economist Steve Keen, who in 2008 famously warned house prices would rise by 40 per cent, has long been worried about Australia’s high rate of mortgage debt, which he says is by far the largest component of debt in Australia today.

I’m not sure we can take Mr Fisher’s observations from the heights of Crown Towers all that seriously but I will note, darkly, that given it was the Chinese that financed the US housing bubble via buying GSE bonds, it is probably less risky to sell them the houses directly instead.

Until the revolution of course.

Comments

    • I know, Rutherford. It is entirely bizarre the President of the FRB Dallas can clearly see Chinese are buying Australian RE but we have no measures and cannot be told.

      • we do have measures

        rate payment accounts are a good indicator

        and if you had been watching trends in Sydney rate payments over the last decade you would be gobsmacked at how much they have been buying – and by the various methods by which even the poorest achieve a foothold in the market

        p

      • We were in Shanghai in April & saw FULL PAGE Ads in the local English newspapers selling Units in Brisbane, Sydney & Melbourne.

        Enough to make you want to throw up.

        By the way & different subject- I looked closely at the label of Coles Home Brand Ice Cream to see where it was made. It was made in Australia but Strawberries were from China! & other sources. Having seen the horrific pollution there & the fact that human excrement is used to fertilise you’ve got to wonder why Australians would want ANY edible product from that country -AND why Coles & others think it’s OK

  1. “I don’t know the specifics of the Australian market, but leverage works very well going in one direction and always comes back to bite you in the other direction. I’m sure the RBA and others are watching this.”

    Yes, they’re watching. Perhaps even with pen in hand hovering over a piece of paper ready to write a stern warning letter should things get out of control.

  2. Oh sure. The revolution of chardonnay socialists who want open borders which would quickly send house prices right up again.

    Gen x & y have been completely brainwashed, no matter if they’re “left” or “right”, they’re a compliant zombie, absolute genius.

    I’m off to the country.Enjoy your lives putting up with nut jobs.

  3. Some more questions for the FIRB

    1.What is the total number of Australian dwellings that are foreign owned?

    2.Of those foreign owned Australian dwellings, how many are second hand?

    3.When the visa of a temporary visa holder that owns an Australian dwelling lapses, what steps do you take to ensure they dispose of the property?

  4. saintmatthewMEMBER

    let’s face it – the boomers are executing their grand, ultimate act – selling off the farm from beneath the feet of Australia’s children

  5. Liu MianzhiMEMBER

    “…GSE bonds, it is probably less risky to sell them the houses directly instead”

    (Sort of) on this topic, although I think that foreign investment in housing needs to be better regulated, I sometimes wonder about the different attitudes to offshore bank funding as opposed to foreign buyers directly. You see economic arguments on pages like this regarding offshore funding, but it doesn’t seem to achieve the same popular angst.

    Yet in substance they have a lot in common: In both cases a local person, either renter or mortgagor, lives in the property and an income stream associated with the property goes offshore, whether via rent or interest. Yes, the “owner” with the mortgage has better security of tenure than the renter, but as pointed out here in comparison with Germany and others, that could be vastly improved (although not entirely resolved) with changes to residential tenancy laws.

    Offshore funding and foreign investors have both contributed to the increase in Australian property prices that is causing problems for young Australian families. But, although I don’t know, I suspect offshore funding and the consequent credit growth has done more than direct investors to increase AU residential property priced in the last 20 years…yet Chinese people bidding at auctions are regarded with suspicion but “Aussie John” is a hero of the Aussie battler(?!)

    At least the investor is sufficiently engaged with the Australian economy to take some exposure in return for their income stream. If houses go down 30% and (as would be likely in such circumstances) the AUD drops to US50-60c on the back of it, foreign investors are toast, losing 50%+ and suffering a bigger loss than the locals. And if they don’t maintain the property adequately, the income and value of the property will both go down. By contrast, you can bet that we will all ensure the foreign funders of our banks are made whole regardless – even if we have to pay with a thoroughly devalued currency, raised from taxes in the middle of a recession!

    I am not defending the current holes in the foreign investment rules. But I think it is sensible to have some perspective about the factors contributing to house prices.

  6. Liu,

    A major distinction might be that the money that flows through the local banks from foreign borrowing does so through Australia’s regulatory system, while the money that flows into the market directly from overseas does not.