Property Values – U.S. vs OZ

While many Australians bemoan the slide in property values in the wake of the Global Financial Crisis, our market has remained particularly resilient compared to that of our American friends. In many areas of the U.S. home prices have fallen by an average of 30% since late 2006. In some cities, the falls are even worse. Las Vegas home values have nosedived 60%, Phoenix 55%, Miami 50% and Detroit 40%. Even the best performing cities like New York have seen prices fall by 20%.

Much of this catastrophe can be traced back to the reckless lending practices of American banks. In the years leading up to the GFC, intense competition between lenders for revenue growth and market share resulted in them relaxing underwriting standards and giving mortgages to millions of high-risk borrowers. These are often referred to as sub-prime mortgages or “NINJA” loans… that is, loans to borrowers who have No Income, No Job or Assets. At the height of the housing boom, these loans accounted for roughly 40% of newly issued mortgages in the U.S. Fuelled by the insatiable greed of financial institutions, this easy-credit epidemic meant that if you could walk and chew gum at the same time, you’d probably qualify for a home loan!

Inevitably, as interest rates increased and unemployment grew, huge numbers of people began defaulting on their repayments, causing the housing bubble to burst. By September 2009, 14.4% of all U.S. mortgages were either delinquent or in foreclosure. This has improved slightly to 11.6% today.

So how do we compare here in OZ?

According to the latest research from RP Data, average falls in capital city home values bottomed at 7.4% earlier this year and have since recovered to be just 4.5% below their previous peak. Generally speaking, units have shown a greater resistance to price falls than houses. Currently, unit values are only 2% below their 2010 peak, with houses down by 4.9%.

Apart from having a more robust economy, our banking system didn’t follow the U.S. trend of widespread sub-prime (low-doc) lending. Since 2008, 417 U.S. banks have collapsed, while not one has met the same fate here. In fact, Australia’s ‘big four’ banks are all ranked in the top 21 safest banks worldwide. This is an incredible achievement when you consider there are thousands of banks globally and we only have 0.32% of the world’s population!

Although there is one thing that Yank banks offer that many Aussies would love to have… 30-year mortgages fixed at just 3.5% p.a!!


  • Unemployment rate – U.S. 7.8% vs OZ 5.4%
  • Delinquent & foreclosed mortgages – U.S. 11.6% vs OZ 0.6%
  • Decline in capital city home values – U.S. 20%+ vs OZ 4.5%

© Brian White – This article courtesy of The article may be reproduced provided the above courtesy notice and author name remain intact.