Australian hedge fund Watermark Funds Management, predicts the property market will peak in the first half of a next year, and fears Australia may be heading for a crash.
According to Watermark, the Australian housing market is disconcertingly unstable, due to the extreme level of mum and dad investors depending on rising prices to make a profit.
ABC news reports that 35% of new mortgages in Australia are taken out by non-professional property investors – a figure that’s roughly three times higher than the U.S, U.K and Canada.
Watermark also suggested that the situation Australia is facing has eerie parallels with what was seen in the U.S, before the global financial crisis started.
“The US experience in the ’00s suggests that housing markets with high participation of leveraged speculators tend to exhibit increased volatility in both booms and busts,” Watermark wrote in a report.
Watermark’s Head of Financial Investment Hamish Chalmers, who authored the report, observes that there is a possibility of a crash if mum and dad investors suddenly exit the the market.
“What happens next is dependent, and how bad things will be depends on the reaction from the Government and regulators,” he said. “It depends on the reaction of the banks themselves and I think crucially, and where Australia is different, is that there is a huge army of amateur investors.”
Source: ABC News