Sydney, Melbourne could see a housing price bubble, says Nobel Prize laureate

Font size :
A Nobel Prize laureate has cautioned that Sydney and Melbourne's real estate markets are showing indications they are in a housing price bubble.
 
The 2002 awardee, Professor Vernon Smith, told the ABC that the country needs to learn lessons from the subprime mortgage bubble in the United States which resulted in a housing crash and the subsequent global financial crisis.
 
"Sydney real estate is growing faster than your other cities and Melbourne has a similar experience," Smith said.
 
“In so far that it's investors speculating and wanting to resell at a profit, some of them are going to be disappointed when things turn around. But free economies involve losses. If you're not willing to take the losses you can't really brag about the gains.”
 
Smith, however, believes Australia can still avoid the worst parts of the housing crash the US saw in 2007.
 
"Households then had a severe balance sheet crunch, many were living in homes where they owe more than the home is worth," he said.
 
"You don't feel like spending money because you're in debt reduction mode and the banks are in trouble because they're holding those bad assets. If you can avoid that sort of thing then you've got a softer possibility for adjustment when prices come down."
 
Smith was awarded the Nobel Prize for his work in experimental economics.
 

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Friday, Sep 22, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords