Australian property market bubble begins to burst
Reports suggest the property market boom in Australia has come to an end, as the proportion of property lending made to investors has dipped, after reaching an all-time high in May. Lending to investors represented 53.5% of all property lending in May, falling to 48.5% in August; this measure stood at 35.5% in 2000, 28.6% in 1995, and 14% in 1991. Another indication that the boom may be over is the percentage of properties sold at Sydney auctions; last Saturday, only 65.1% of properties sold, down from 70% the week before, and 90% in May. Increasingly concerned with the rapidly expanding property market, authorities introduced additional capital requirements for banks earlier this year, designed to force them to protect themselves from a potential housing market downturn; the banks most affected included Commonwealth Bank, Westpac, NAB, and ANZ. Macquarie Group forecasts a 7.5% fall in house prices over the next two years.

The madness is receding. Each month for a year now more than half of all the dollars lent for buying and building homes went to investors. The insanity is apparent when you consider that until the mid-1990s only 10 to 20 per cent went to investors. People bought houses to live in.

In May this year as prices in Sydney and Melbourne soared to once-unimaginable heights the proportion lent to investors hit an all-time high of 53.5 per cent. And then it slipped, in August sliding below 50 per cent for the first time in a year.

At 48.5 per cent, it's still ridiculously high, but something has changed. The canaries can smell the gas.

The Reserve Bank has been desperate to contain investors because it believes they are accelerating the boom and might amplify the risk of crash.