Australia is reportedly in a housing crisis as the Treasury recently declared that Sydney is in the midst of a housing bubble. According to a report from Bloomberg.com, during the parliamentary committee hearings held in Canberra on Monday, Treasury Secretary John Fraser said, "When you look at the housing price bubble evidence, it's unequivocally the case in Sydney - unequivocally. Frankly whatever the data says just casual observation would tell you that's the case."
The major drivers for the bubble, according to Fraser, are low interest rates and easy financing access. His major concern is the flood of funds entering the housing market as rates are so low.
The home prices in Sydney increased by 15 percent for the month of May compared to last year's figures. This runs in contrary to April's numbers, which saw a decline of 0.7 percent, according to data obtained by Corelogic RP Data. This comes alongside Australia's major banks' decision to rein in home loans to investors, after a recommendation from the country's financial services regulator, to just 10 percent per year.
Australian Prime Minister Tony Abbott, for his part, welcomed the increase in housing prices. According to a report from the smh.com, when quizzed by Labor leader Bill Shorten as to Fraser's earlier comments, the Prime Minister said housing affordability was important to him. He added that he would like to have prices of homes in Sydney continue to increase.
He added, "As someone who, along with the bank, owns a house in Sydney, I do hope our housing prices are increasing. I want housing to be affordable but nevertheless, I also want house prices to be modestly increasing."
Meanwhile, Reserve Bank of Australia Assistant Governor Malcolm Edey said that the bank refused to label the "phenomenon" as a housing bubble. According to him, "A lot of people do think it's a bubble, serious people think that, and we agree this is a situation where the market is strong, it's overheated, it's a risky situation."
