Australia’s Housing Market – May 2022

Australia’s housing market is about to burst. Inflation and inflation expectations are both going up and becoming slowly entrenched causing Australia’s central bank to worry about its effect on consumer prices and raising interest rates to try to tame it. Rate increases along with a high percentage of variable-rate mortgages are set to deflate house prices. Total outstanding residential loans to disposable income of households in Australia was at 150%, according to the latest data compiled by the Economist (one of the highest numbers among rich countries). An average full-time earner on 90,000$ would have a debt-to-income ratio of 6.4, higher than 4.5, a benchmark for high indebtedness (according to the daily mail). Highly-leveraged people would be forced to sell their properties to be able to afford payments. Maybe try to short a mortgage-backed security.

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