Con­struc­tion not key driver of price boom in Australia

Financial Mirror (Cyprus) - - FRONT PAGE -

Fitch Rat­ings said in a new re­port that hous­ing sup­ply alone is un­likely the root cause of the re­cent price boom in Australia or the cause of fu­ture price cor­rec­tion in con­trast to other over­seas ju­ris­dic­tions.

Aus­tralian dwellings com­pleted have been in the 1.5 to 2.0 houses per 1,000 cit­i­zens range per quar­ter, show­ing a sta­ble trend, sim­i­lar to Great Bri­tain. This contrasts with Ire­land and Spain, which both suf­fered a build­ing boom-and-bust lead­ing into the 2007-2008 global fi­nan­cial cri­sis. Australia has kept a growth of 0.4 houses per new cit­i­zen over the past 20 years, in­di­cat­ing that the ra­tio be­tween sup­ply and pop­u­la­tion has re­mained sta­ble over time.

Fitch has ad­justed house-price fall sce­nar­ios up­wards over time to ac­count for the in­creased po­ten­tial of a sig­nif­i­cant fall in prices. Fitch’s ‘AAA’ mar­ket-value de­clines in Australia range from 45% to 56%. Fitch ex­pects Aus­tralian res­i­den­j­tial mort­gage-backed se­cu­rity (RMBS) rat­ings to with­stand any fu­ture prop­erty price cor­rec­tion, should it oc­cur.

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