Newgate Capital Partners have released a new research note examining Australian housing, where they believe that the ingredients are in place for a housing crash.
Below are the key extracts.
Since 1991 Australian banks have increased their loan book by 8.2% per annum, compared to economic growth of 6.0% per annum10. Beneath this headline loan growth is a significant change in loan composition. Over this time, Australian banks have increased loans to the housing market from $85 billion to $1.5 trillion11, representing loan growth of 12.2% per annum. This level housing debt represents approximately 100% of Australian GDP. For context, US housing debt as a % of GDP peaked at 95% just prior to the Global Financial Crisis12. Because growth in house lending has been so much greater than any other type of lending, housing loans have moved from 20% of all bank loans in 1991 to 60% today13. More concerning is that 20% of all Australian bank loans have been made for real estate investments…
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