Mr Fraser said a ‘casual observer’ can see the bubble in the property market. Photo: Getty
Despite this warning coming from one of the most economically clued-in and influential people in the country, Prime Minister Tony Abbott seemed to take it with a pinch of salt.
Speaking in parliament on Monday, he said as a Sydney property owner himself, he hopes house prices in that city continue to rise.
“I want housing to be affordable, but nevertheless I also want house prices to be modestly increasing,” Mr Abbott told parliament on Monday.
Speaking earlier, Mr Fraser said:
“It does worry me that the very low historical interest rates are encouraging people to perhaps over-invest in housing.
“I”m not just [talking] about buying housing, but I’m talking about investing in housing.”
He said an increase in spending on renovations was also evidence that too much money was going into property.
“You just have to see these renovation shows … to realise something is amiss,” he said.
If the bubble bursts in dramatic fashion, the all the money spent on inflated house prices and expensive renovations will essentially vanish. The worst case scenario is that those hit will be unable to service their debts, which would be a perilous situation for the banks – and for the taxpayers who would have to bail them out.
