Why Australia Needs the Perpetual Loan

May.30.10 | About: iShares MSCI (EWA)

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Housing bubble in Australia? Ridiculous, says leading economist.

Apparently housing in Australia has become a giant ponzi scheme that is maintained by sellers having all the same strategy. Don't make the same mistake as US sellers, and never, ever lower your price! The strategy also includes honeymoon periods of low interest rates. We cannot forget that Australia was once a drop off point for criminals from England. There appears to be a slight of hand going on in Australia, but we could be coming to the end of the party.

One piece of evidence that we are arriving at the end of the bubble is the effort to have interest only payments, almost permanently. This would mean that the banks would continually own the property, and people could just come and go with interest only. How bizarre. But here we have it, the ING perpetual mortgage, where you pay what you like and you never pay the loan off.

Yes I do think we are nearing the end. If you own a house in Australia I would recommend selling it.

Disclosure: No positions