Pop goes the Property Market by James Reed
The governor of the Reserve Bank has warned that the debt-mad property market in Sydney and Melbourne, which is the bulk of Australia, is about to face big problems. (The Australian, April 5, 2017, p. 1) First, banks are lending to people who have no hope of repaying their debts. Second, because of this, household debts are rising more than twice as fast as household income.
A repeat of the 1890s great property collapse, caused by a housing land boom could soon be repeated, where half of all banks closed. One segment of the financial elite class has poo-pooed all of this, saying that it has a low probability of happening. I would like to know who gives them their probabilities. Anyway, even if this was so, the consequences will be catastrophic for protected little Australia. We are only just getting the unhappy scenario of people living in cars and under bridges common in Europe and the United States.