The Aussie real-estate market is an increasingly mercurial frontier for investors and home-owners alike. Housing markets are no stranger to high rates of default and bad debt, but Australia’s uniquely volatile real estate business has been steadily oscillating toward bubble status since 2001. The whole world was crippled when America’s housing bubble, launched to dangerous heights by massive collateralized debt obligations and junk bonds, eventually exploded in a manner that shook the global economy. Australian default rates are nothing short of shocking and have narrowly avoided causing American 2008-esque crashes in the past several years. The uncertainty from this part of Australia’s economy adds fuel to its fire, but other times it serves to strengthen its own currency and outperform other sectors of the global economy. But everything has a cost, and though Australia might not be facing the immediate risk of a bubble, a slow and painful demise is usually in store for those who mistake healthy credit margins for insurmountable housing debt.

Rising house prices, especially those that outpace national CPIs, are usually strong indicators of misplaced value in housing markets. During the 1998-2009 period, Australia’s national economic growth averaged less than 3%, once the debt was taken out of the equation. Not ideal, but not enough cause for immediate concern either. Economic slumps of that size are usually cyclical, and if they’re not, they’re symptoms of greater underlying problems. Debt isn’t just a problem in the Aussie housing market, it’s the systematic and routine racking of massive debt that really causes lasting issues. Mortgage credit growth stimulates all sectors and drives up value of housing stock, subsequently growing home-owners’ wealth. This is the kind of growth that stimulates the economy while also jump starting productivity, which is crucial.

So where does Australia go wrong? One explanation points to the government’s love of stamp duty. Even if 7% growth only yields less than half that amount of real economic growth, the government reaps the rewards of cash flows from stamp duty, basically increasing the use of the housing market and its debt as a crutch for economic growth, which isn’t actually as much as its made out to be. This becomes a vicious cycle, when value starts relying more on economic sentiment than on the actual underlying asset. Synthetic debt packages start to rack up on top of the already insurmountable “real” debt, and subprime loans become synonymous with inevitable failure.

Australia isn’t necessarily doomed to follow in the footsteps of America, or even China’s market crash though. No two snowflakes are alike, and although reasonably predictable, no two market crashes truly mimic one another. There is a certain trait to be admired in Australia’s resilience, no matter how serendipitous it may have been. For now, negative sentiments about the Australian housing market may just be the necessary dose of realism that the economy needs to keep from slipping up.

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