PHOTO: Australian property market
- Australian house prices have risen by 22.2 per cent in the year to November
- But Barefoot Investor Scott Pape said the housing market bubble would burst
- He said record low interest rates fueling the surge had nowhere to go but up
Financial guru Scott Pape has warned Australia’s housing bubble is set to burst, and Australians ‘wouldn’t want to be up to their eyeballs’ in mortgage debt when it does.
Pape, better known as The Barefoot Investor, noted in his blog interest rates which are at record lows ‘will rise and when they do, they’ll burst the housing market bubble’.
Australian house and apartment prices have risen dramatically, with a 22.2 per cent increase in the year to November marking the fastest annual surge since 1989.
Property values are growing at ten times the rate of wages growth.
Housing prices have surged up 22.2 per cent in Australia in the year to November with tough competition for buyers to secure a house (stock image)
CoreLogic data showed the national value of homes had increased for 14 consecutive months, with the median price increasing by $126,000 in the past year.
Australia’s mid-range property price of $698,170 is now so dear an average, full-time worker earning $90,329 would be in mortgage stress, even with a 20 per cent mortgage deposit.
That’s because the Australian Prudential Regulation Authority, the banking regulator, considers a debt-to-income ratio of six of more to be dangerous.
In Sydney, house prices have surged by an even more dramatic 30.4 per cent in the year to November, taking the mid-point to a very unaffordable $1,360,543.
In his blog, Pape answered a question from a reader who asked why they were finding it so hard to buy a house.
‘My fiancé and I both earn good money. We have a healthy deposit and budget and want to buy so we can start a family,’ the reader said.
‘We’ve offered more than they were asking and been told no, the vendor took a cash offer instead.
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