Two notes on Australia’s infatuation with property. First, unlike a tender first love or a smouldering romance, this housing love affair is causing financial stress. “The number of Australians under financial stress from housing costs has soared to a historic high, with more than a million households now spending at least 30 per cent of their income on loan repayments or rent,” reports Nasssim Khadem in today’s Age. “Census figures show that the number of households officially declared under “mortgage stress” has almost doubled in five years – to 547,054.”
Not content with suffering housing pain at home, Australians are cruising for a housing bruising in American commercial real estate. You’d think Aussies would be warned off by that other great re-valuing in the world, the marking down of subprime-backed bonds from the sloppy and deflating US housing bubble. But noooooo! Aussies can’t get enough American property risk.
“Spurred by the falling US dollar,” reports David Levitt in today’s Sydney Morning Herald, “surging superannuation fund inflows and the need for secure, high-yielding assets, Australian investors have widened their lead as the biggest international buyers of US real estate. Australian purchases this year amount to $US7.7 billion ($9 billion) so far, or $US2.2 billion more than in all of 2006, according to New York property researchers Real Capital Analytics.”
Madness. As an asset class, American property has already had its tremendous bull run. Buying American commercial property on the threshold of a mega consumer bust is like buying pets.com in 1999, just before the tech wreck. Australian companies with regrettable exposure to American property: Macquarie Bank (ASX:MBL), Westfield (ASX:WDC), Record Realty (ASX:RRT), Centro Properties (ASX:CNP) and ING.
Markets and Money