"The real-estate bubble: Things are so frothy that Morgan Stanley is advising investors to buy put options on real estate and bank shares to profit from a likely housing-market bust.
Bubble Troubles
Homes are about 40 percent overvalued and prices are vulnerable to rising unemployment and tighter bank lending, Gerard Minack, Sydney-based head of Morgan Stanley’s global developed market strategy, wrote in an Aug. 16 report. Home prices rose at an annual rate of 18 percent in the second quarter, according to the Australian Bureau of Statistics.
The Reserve Bank of Australia’s six interest-rate increases since October haven’t done the trick. Regulatory steps are needed to keep this bubble from destabilizing a nation that has avoided a recession for 19 years, earning it the well-deserved nickname “the miracle economy.”
As of March 31, the nation’s household-debt-to-disposable- income ratio was 158 percent. Sky-high household debt leaves Australia vulnerable to a double-dip global recession."
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