http://www.smh.com.au/business/foreign-punters-spooked-by-perky-property-market-20100719-10hwp.html
Foreign punters spooked by perky property market
ERIC JOHNSTON
July 20, 2010
OVERSEAS bank investors are becoming increasingly jittery about Australia's housing market. Bank analysts are fielding calls from overseas-fund managers about the sustainability of a surge in prices over the past year.
A quarterly survey of global housing published by The Economist in London last week concluded that Australian property prices were the most overvalued of the 20 economies it tracks across Europe, Asia and North America.
The assessment, which puts Australia ahead of countries such as Hong Kong and Singapore, is calculated by comparing house prices to rental yields and long-term averages.
This has since sparked a flurry of calls by overseas fund managers to both bank investor relations teams and market analysts about the health of the Australian housing market.
CLSA's banking analyst, Brian Johnson, who has previously cautioned about housing bubble conditions emerging in Australia, said investors were becoming concerned over the prospect of a collapse in prices.
Mr Johnson, who counts a number of large fund managers in Asia as clients, said existing low interest rates made Australian housing affordability reasonable, but it was ''stretched relative to other countries''.
He believes the catalyst for any meaningful correction in house prices would be rising interest rates - particularly for first-home owners - rather than unemployment.
Australia's resilient economy and a rising house market have led the Reserve Bank to raise rates six times since October.
House lending in Australia was less risky than in the US - partly because of full recourse lending and the large exposure to variable interest rates here - Mr Johnson said, but the housing market here was not without risk.
His comments follow the warning by Joseph Healy, a senior National Australia Bank executive, last week that a bias by Australian banks towards writing home loans rather than lending to business could undermine the economy's long-term growth prospects. The torrent of funds flowing into housing might also be enlarging ''asset bubbles'' by fuelling excessive investment, he said.
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