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Local community fears of an Australian housing bubble are the result of media speculation, based on overseas analysis, that fails to account for Australia’s unique market circumstances.
The Organisation for Economic Cooperation & Development’s recent claim that Australian house prices may represent a threat to the economy is similar to much of the foreign commentary we’ve heard before; it fails to fully appreciate the nature of our economy, how Australians invest, and where they want to live.
Australia is the only country in the world where nearly 40 per cent of it’s population wants to live in two capital cities that together comprise less than 0.3 per cent of the country’s landmass. Historic low interest rates have combined with overall positive economic conditions, and a national preference for housing investment over shares, to drive up house prices in Sydney and Melbourne. This is also true to a lesser degree for Brisbane and the Gold Coast however this is not the case across much of regional Australia and in Perth where house prices are falling all flat.
First National Real Estate is of the view that unless there is a sharp increase in interest rates or a sudden rise in unemployment, there is limited potential for a housing prices crash.
Both scenarios appear unlikely at present.
The Reserve Bank of Australia’s (RBA) preference would in fact be for further cuts to official interest rates if that didn’t increase the risk of further inflating house prices.
While rates will eventually have to rise, that’s clearly not the RBA’s choice while inflation remains below target and the country is not at full employment. And, with 1.1 per cent economic growth announced in April, a significant increase in unemployment is also unlikely.
Some points worth noting as far as our local Gold Coast market is concerned. Foreign buyers cannot buy “second hand property” without FIRB approval. The biggest force in this market is local buyers about 30% of which are investors. Local investors include professionals, teachers, police and tradies.
In reality, Australia has no oversupply of property, data shows new construction approvals are trending downwards, the country’s lending standards continue to be strong, which contrasts sharply with the conditions that led to housing bubbles bursting in many countries following the Global Financial Crisis and rents are trending up.
To avoid a bubble APPRA has moved to increase the cap on how many interest only loans banks can make and has lifted LVRs on Investment Property loans.
This may be having some effect in the Melbourne and Sydney markets but It does not appear to be having any effect here. Buyer demand remains strong right across the market as does rental enquiry. We are still receiving seven applications for every property we have for rent. by David Hamilton
Talk Of Gold Coast Housing Bubble Unwarranted
palmbeachfn.com.au April 2017 First National Palm Beach 15 Palm Beach Ave Palm Beach, Queensland 4221
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07 5559 9600