Pimco: Local housing market in “serious bubble”

Pimco’s head of global wealth management in Australia says the local property market is in “a serious bubble”, which is hurting the image of Australian banks overseas.

Peter Dorrian says there is a big difference in opinion between how Australian investors see our banks and how they are perceived offshore.

“It’s largely got to do with what you think is going to happen with the Australian property market,” Dorrian told Business Spectator.

“To be honest, it’s a serious bubble,” he says. “Even my colleagues in the US look at the Australian property market and say it’s the most overvalued property market in the world.

“They’re looking at all sorts of different metrics that they use to standardise property markets around the world and say that they think Australia is seriously overvalued in the residential space,” he says.

Dorrian told Business Spectator that while much of the hard data regarding Australian banks’ loan valuation ratios meant there would need to be a significant fall in property prices before any impact was felt, overseas investors were unconvinced.

Based in the United States, Pimco is the world’s largest bond investor. It manages about $US1.3 trillion ($AU1.25 trillion) in assets – similar to the value of the entire Australian economy’s output in a year.