![]() The bottom of the above graph shows it is indeed true that lots of these investors take out interest-only loans, which is one of the things that worried Mr Tepper. In Australia the banks are the ultimate owners of the loans so they need to know the truth. Maybe these figures are still skewed by crooked brokers but it it will be much less than in the US in 2007, where loans were packaged and sold to third parties as sub-prime bonds. ![]() ![]() Only 6 percent of investors are now taking out loans fro more than 90 percent of the house's value. But this share of the market is low and falling. High loan-to-valuation ratios are a danger for buyers and banks since if they cannot sell the house for more than the loan is worth they take a loss. The top of the above graph shows the share of new loans where the loan is more than 80 percent and more than 90 percent of the estimated value of the property. Lending standards were tightened dramatically last year and all the statistics of lending standards were recalculated to adjust for any fibbing and here is the result. The Reserve Bank of Australia, and others, sounded the alarm about dangerous lending more than a year ago and took action. Perhaps that lack of nuance is why Mr Tepper failed to spot a fundamental difference between the Big Short and Australia: Unlike the US in 2007, regulators here are very aware of the danger of a real estate bubble. Surely such a couple would be looking for an inner city flat in Newtown?Ĭhristian Bale plays Michael Burry in The Big Short, which is nothing like what is happening here. But in the first sign that the report is a little out of touch they did their undercover reporting posing as a gay couple on $125,000 a year looking to buy an apartment in rundown areas like Blacktown. Mr Tepper and John Hempton of Bronte Capital did the same in western Sydney. The maverick analysts then make a fortune betting against the banks. In the film, a ragtag group of maverick US analysts went out to remote housing developments in the US and spotted the tell-tale signs that banks were making home loans to people who could not afford to repay and lending for much more than the houses were worth. Jonathan Tepper of hedge fund Variant Perceptions has clearly misunderstood the film "The Big Short." Australian banks and the western suburbs of Sydney are not like Florida and Wall Street in 2007.
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