Housing price bubbles can be economically devastating, but is Australia’s housing market in a bubble right now, questions Jamie McIntyre.
Everyone has an opinion. The blogosphere is rife with claims that the Reserve Bank of Australia has created a housing price bubble, or that it wants to create one. Some even state that the RBA is in the process of creating a housing bubble accidentally. Hence, the story varies.
Housing prices in Australia have definitely risen a lot over the years. The capital cities established a housing price index produced by the Australian Bureau of Statistics, which shows more than double the growth in the last 20 years.
In recent years, housing prices have wobbled around, however, it would still be tough to sustain an argument that states that prices aren’t high.
Therefore, housing is undoubtedly expensive, but is the Australian property market heading towards a bubble?
As an educator and a property investor, I believe that the Australian property market is far from a bubble. In fact, I am very bullish about the property market in this country.
It is amusing how the press recently predicted a property crash and soon jumped on to stating that it is heading towards a bubble.
Yes, housing prices are expensive and overvalued. However Sydney housing prices have been expensive and overvalued since the 1980s. However, that has not stopped the growth within the property industry.
During a speech at the New South Wales Parliament last year, I mentioned that by 2050 the price of an average house in Australia, particularly Sydney is expected to be over $8 million.
For those who think they should wait to buy property at a cheaper price in the future could be sadly mistaken. I predict a strong price growth for the next three years and a slower growth after that.
I never live in fear of an Australian Property crash, as I know it isn’t our problem. If there was one, it would be the Australian banks’ problem and I am confident that they know what they are doing and control the market to avoid such bubbles.
I am increasing my Australian and US Property holdings and doing a lot of land banking as I am bullish about these investments. I am also suggesting my investor clients that now is the time to be acquiring quality property as soon as possible.
The Assistant Governor for the Reserve Bank of Australia, Malcolm Edey was also keen to play down such talk when he said that the trend in prices relative to household incomes has been “roughly flat” over the past decade…
Excerpted from an article originally published in issue 3 of Property Inc. magazine.