The basic laws of physics have seemingly ceased to exist in Australia…water is no longer wet, the sky is no longer blue and home prices are not in a “speculative bubble,” at least according to some conflicted commercial banking executives who are massively long Australian housing. 

Testifying before a parliamentary committee, the chief executives of National Australia Bank, Westpac Banking and Commonwealth Bank of Australia all said that while they are worried about elements of the housing market, prices aren't over-inflated.Per Bloomberg:

“I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify,” Westpac's Brian Hartzer told the committee in Canberra Wednesday. A bubble isn't occurring in Sydney or Melbourne, where house prices have risen the most, he said.

“There are increasing risks, but I still believe the answer is no,” National Australia Bank's Andrew Thorburn said when asked if houses in Sydney and Melbourne are overpriced.

Commonwealth Bank, the nation's largest mortgage lender, is “lending at levels we are comfortable with” across Australia, Chief Executive Officer Ian Narev told the committee when he testified Tuesday.

Of course, as our readers are well aware, prices in Melbourne and Sydney have skyrocketed in recent years, fueled by record-low interest rates, increased demand from overseas buyers and tax breaks for property investors. The Organization for Economic Co-operation and Development last week said the biggest threat to Australia's economy is a hard landing in the property market.

But sure, 100%+ rallies in home prices are completely reasonable. 

Of course, one persistent concern has been the risk around apartment development in Melbourne and Brisbane, with Chinese buyers getting caught by the clampdown on lending and the enforcement of capital controls.