Some housing myths don’t die easily, from Chris Kohler who is doing his best counter his old man’s bubble worship:
The amount of debt in Australia’s red-hot housing market, which is increasingly being referred to as a ‘bubble’ and ‘overextended’, is apparently showing “greater resilience than generally assumed”, according to Credit Suisse analysts.
The analysts admit the median mortgage debt in Australia was “relatively high” in 2014 (the latest data the analysts refer to) at $292,000 and has doubled between 2002 and 2014, but argue the debt is skewed to top wealth and income quintile households.
“Housing debt is highly skewed (and skewed more positively than negatively in our view) implying greater resilience within the household sector to financial shocks than is generally assumed,” analysts led by Jarrod Martin said.
“There is a fallacy of averages in merely examining overall household indebtedness.”
“Positives: 31 per cent of households have no debt at all; 32 per cent of home owners own outright (two-thirds of which have no household debt at all); Bottom quintile income households are quite debt averse.
“Risk segments: Mortgagee households that also hold geared other residential property debt (estimated 5 per cent of all households), given double (and relatively high) leverage; Bottom quintile wealth households with housing debt (estimated 1 per cent of all households), given that median property gearing levels here are high.”
Credit Suisse reiterated its order of preference in the big four Aussie banks – 1. NAB (outperform), 2. Westpac (outperform), 3. CBA (outperform), 4. ANZ (neutral).
As shown by Gerard Minack way back in his 2010 housing report, Australia’s household debt profile was very similar to the USA’s just prior to its housing bust:
Of course it will have changed now given the US unwind but I doubt very much that the composition has changed here. Anyway, the point is that “the rich hold all of the debt” is, by analogy at least, meaningless…
