Australian Real Estate Bubble Popping — Marc Faber urged investors to short ANZ

The Australian property bubble might have finally popped, and when the drop accelerates, you can expect the same scenario as what happened in the UK in 2007-2008: a massive change in the monetary policy, with interest rates dropping to zero, and a collapse of the AUD, of epic proportions.

If you add to that a collapse in equity and commodities markets, the fall can easily reach 40% against the USD.

Here are a few quotes from the Bloomberg report:

Australian home prices slid 1.7 percent in the first quarter from three months earlier, the biggest drop since the third quarter of 2008, government data in May showed. Prices fell 0.3 percent in both April and May, according to RP Data.

Demand for mortgages, which account for about 63 percent of banks’ outstanding loans in Australia, slowed in April to the weakest annual growth rate since data began in 1977. Home loans more than 30 days late hit a record 1.79 percent in the first quarter, Fitch Ratings said on May 26, and “low-doc” loans that were more than 30 days overdue climbed to 6.74 percent.

Marc Faber, publisher of the Gloom, Boom & Doom report, last month urged investors to short-sell Australia & New Zealand Banking Group Ltd. (ANZ) shares, citing excessive household leverage and an overvalued property market. Faber, who made the call in Barron’s Mid-Year Roundtable, didn’t respond to e-mails seeking comment for this story.

Mike “Mish” Shedlock, an investment adviser at Sitka Pacific Capital Management, who publishes the Global Economic Analysis blog, says such shortage claims are “pure nonsense.”