Commonwealth Bank encouraging overseas investors to further inflate housing market

A housing affordability crisis in Australia fueled by increasing involvement of investors? A growing crisis in which only the very rich of future generations are going to be able to buy their own home? Iin which investors own the properties, and families are stuck renting for the rest of their lives? To this wonderful scenario the Commonwealth Bank says YES PLEASE and WHAT CAN WE DO TO MAKE IT WORSE:

The simmering debate about whether Australia has a housing bubble erupted again this week over a Commonwealth Bank presentation that seeks to assure global investors Australian real estate is a safe bet.

Senior Commonwealth Bank executives have travelled the world in the past couple of weeks with a presentation showing how Australian house prices, and the key price to income ratios, compare favourably with similar countries.

Isn’t that nice – the CBA wants to encourage more overseas investors to pour their money into the already inflated market. That’ll make its vast stake in existing property more secure, and increase the amount it can profit from ever-increasing home loans – who cares if the upshot is that an increasing proportion of the Australian population is being permanently locked out of buying their own home?


Craig James is already on the property ladder, and plans to use the inflated equity in his existing portfolio to force more young families to rent from him instead. Then he will live in a giant fortress with other wealthy Australians where the poor people can’t get at them.

When will governments wake up and see that the invasion of the market by investors is the real problem, and that it’s government tax policies – Howard’s cut to CGT in particular – that have made it so? How bad does the problem have to get before they take it seriously?

UPDATE: An international credit rating agency proposes to seriously analyse the extent of Australia’s problem, and bank stocks fall. (Via Jordan in the comments.)

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11 responses to “Commonwealth Bank encouraging overseas investors to further inflate housing market

  1. Remember the Govt. is on the take too. Higher prices mean higher stamp duties and higher rates for local Govt.. No wonder they feed the beast and act in their own self interest, to justify their balloning pay packets, instead of acting of acting for the greater good that they were elected to do. Shame corrupt public officals. Of course they write the laws so this baltant corruption is not illegal.

  2. Splatterbottom

    The very thing that creates the demand is the fact that housing prices keep going up. This is a political necessity, and governments will do everything possible to ensure that nothing changes.

    If the prices do fall, you will be bleating about how the majority of the losses will fall on new entrants who have just paid top dollar to enter the market.

    Given the political costs for the government which allows prices to decrease, it is almost certain that house prices will continue to rise. It is absolutely certain that you will keep bleating about whether the prices rise or fall.

  3. It would have to be done gradually. The first step is for prices to atrophy.

    If governments make sure nothing changes, we’re going to have a situation where only the rich can own their own house, and an ever-growing proportion of the nation are stuck renting. With a number of serious and devastating flow-on effects.

  4. The younger generation might as well get used to renting and having a lower standard of living generally. Their main task is to support the burgeoning older generation. Euthanasia and death panels will only mitigate part of the problem.

  5. The younger generation might as well get used to renting…

    With one exception, all our European friends rent their flats/houses.
    They also travel extensively every second year, want for nothing and still pile money into their pension accounts so that, when they retire, they can travel extensively every second year and want for nothing.

    I’ve got a $3000 a month mortage, constant house related expenses and no fucking holidays!
    Makes me feel like I got my priorities wrong.

    Regarding the post.
    I see the CBA’s actions as a necessary step to combat the misinformation being put out by overseas hedge funds.

    Scores of hedge funds from around the world are actively shorting the shares of Australia’s banks.

    These pricks have been short-selling Australian banks for a while now and are looking to cash in.
    Because of our strong economy and Government bank guarantees, the hedges aren’t getting the results they want.
    Rather than take a bath on their stupid punts, they are actively seeking to sabotage our financial industry.

    Aussie banks stick out like dogs’ bollocks as a profit opportunity on short selling because their market capitalisation has barely been affected by this global crisis.

    They should be lined up against the wall and gut-shot.

    This isn’t an housing affordability issue.
    This is an issue of unethical Cowboy Capitalism and good on the CBA for being pro-active.
    Cheers

  6. Loans get approved to corpoRATes that should never be approved on the financials. The lender then greases the hand of the person who approved with part of the borrowed funds. This is the visious cycle that anyone who runs money knows. These poor and taxpayers bailout any hiccups that happen results. Thanks god for socialised losses and all upside gains capitialism. The youth never stood a chance and never will without civil unarrest about this corrupt system, where is the populas’ will?

  7. I came merely to share some news that should make you happy, Jeremy, regarding the

    http://www.smh.com.au/business/housing-stress-test-spooks-market-20100929-15x2u.html

    While I’m here, I’ll note that Marek’s objection to the actions of overseas hedge funds, even though it is a carbon copy of pretty much every rant against any kind of short selling ever, is interesting nonetheless. I might come back and comment on it later…

  8. Not so much happy, Jordan, as cautiously optimistic that maybe a possibility that the market could eventually police itself without a devastating crash.

    Not all that optimistic, though.

    I’ve added an update to the post.

  9. that article about shorting the banks is very interesting.

    regarding that tour the commonwealth bank execs made, they got caught fudging the figures. they tried to show that our prices in capital cities are not overvalued, using graphs. but the figures were cut and pasted cleverly from 2 different surveys. i’d find the steve keen post on it, but cant be bothered

    also if execs are making trips overseas to calm investors, I think there’s a problem. if interest rates continue to rise, our rating gets downgraded, or the banks keep getting shorted, theres trouble ahead

  10. usesomesanity

    As the banks keep raising their interest rates over and above reserve bank increases, overcharge customers, so much so they are forced to take class actions to get their stolen money bank, pay their ceo’s & exec’s ludicrious renumerations for running money and make ever increasing record profits where is the BANKING SUPER PROFITS TAX?

  11. Pingback: Living on $83 a week | An Onymous Lefty

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