marc faber on australian property bubble, page-7

very cheap words tony---so what evidence have you got to show that we will see a property crash--but just to add,and it is a very balanced summation from glen stevens


Australia does not have a problem with public debt, as I have already said. Nor do we have a problem with corporate debt. Some highly leveraged entities foundered over the past couple of years but most of the corporate sector had pretty strong balance sheets going into the downturn and they are even stronger now.

The big rise in debt in the past couple of decades has been in the household sector. There have been many reasons for that and, overwhelmingly, households have serviced the higher debt levels very well. The arrears rates on mortgages, for example, remain very low by global standards. As a result the asset quality of financial institutions has remained very good. So, to be clear, my message is not that this has been a terrible thing.

But that doesn?t mean it would be wise for that build-up in household leverage to continue unabated over the years ahead. One would have to think that, however well households have coped with the events of recent years, further big increases in indebtedness could increase their vulnerability to shocks ? such as a fall in income ? to a greater extent than would be prudent.

It may be that many households have sensed this. We see at present a certain caution in their behaviour: even though unemployment is low, and measures of confidence have been quite high, consumer spending has seen only modest growth. This may be partly attributable to the fact that the stimulus measures of late 2008 and early 2009 resulted in a bringing forward of spending on durables into that period from the current period (though purchases of motor vehicles by households ? a different kind of durable ? have increased strongly over recent months). But the long downward trend in the saving rate seems to have turned around and I think we are witnessing, at least just now, more caution in borrowing behaviour. Of course this will have been affected by the recent increase in interest rates but the level of rates is not actually high by the standards of the past decade or two. We can?t rule out something more fundamental at work.

We can?t know whether this apparent change will turn out to be durable. But if it did persist, and if that meant that we avoided a further significant increase in household leverage in this business cycle, it might be no bad thing. Moreover if a period of modest growth in consumer spending helped to make room for the build-up in investment activity that seems likely, perhaps that would be no bad thing either.


you can post all the 4th grade tripe you want but you cannot present anything remotely resembling a balanced and well thought out view---there is no doubt there are dangers to the housing market however anything which triggers a 40% collapse will affect everyone ,not just property owners.