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Slowing Down Of Compounding Real Estate Values

Posted by Paul Wilson

Westpac CEO Gail Kelly has made it clear that she does not expect real estate to ever see a similar 10 years in compound values as it has done in the past 10 years.

 

“Australians would no longer take out massive loans, she added, and instead banking would return to ‘old-fashioned values’”, the Herald Sun reported.

 

At the Prime Minister’s Economic Forum in Brisbane this week where Gail Kelly voiced her views, senior economist, Dr Harley Dale, also told Real Estate Business that he agreed with Ms Kelly’s comments.

 

Dr Dale indicated that it was the fact that many economic indicators came together at roughly the same time which caused the speed with which housing prices raced ahead over the past 10 years or so. These economic factors being:

 

interest rate lower from the mid 1990′s, tax reform in the early 2000′s and even later the more competitive lending market.

 

All these changes, along with the onset of the baby boomer years, caused an unprecedented change in the real estate market, one unlikely to happen again.

 

Governor of the Reserve Bank, Glenn Stevens, also tended to agree with Ms Kelly’s comments.

This all makes an interesting contract to the comments by Credit Suisse in the latter part of May which indicated that due to sluggish lending growth, local banks are could be lured into the lending standards associated to the collapse of banks elsewhere in the financial crisis.

 

Perhaps the reduced consumer confidence has arisen from the fact that the Australian population is not seeing the same growth as in previous years and feels that the economy is not strong. Whereas in fact, the Australian economy is still very strong when compared to the rest of the world.


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