Australia’s house market draws concerns
The Australian house market has seen its boom turn into a bubble. However, those wishing the bubble to burst may be in for some disappointment.
According to the Organisation for Economic Cooperation and Development (via Domain), some pessimists may be right about the Australian property prices experiencing a “sharp correction.” Treasury Secretary John Fraser supported such claims saying that Sydney along with other up markets like Melbourne have already been linked with strong signs of a bubble. Domain Group senior economist Andrew Wilson refused to agree, saying: “We have nothing like the pre-conditions for a sharp fall in house prices.”
He also said that given the present conditions of the housing market, there could only be three scenarios that can promote radical price changes from 5 to 10 percent in Sydney and Melbourne. He remained convinced that the scenarios will not likely happen.
The only way prices can also crash just as sharply is that if the Reserve Bank of Australia increased interest rates rapidly and in significant amounts. Wilson noted that in order for the Reserve Bank to do this and raise interest by as much as 2 to 6 percent, the country needs to see a more than 5 percent of economic growth.
“And the only way that will happen is if we have another unbelievable mining boom,” he said.
“Even then they might not do it.”
On the other side of the spectrum, whereas property rises may be relaxing for a bit following a year of superheated growth, aspiring home owners are still in for some bad news according to one investment banker. According to a report from the Sydney Morning Herald, Australian house prices will continue to increase while the government will not be able to prick the bubble because it cannot afford to do so.
Saxo Capital Asia macro strategist Kay Van-Petersen warned that any sign of instability in China may send new investments or money to the Australian market.
“There is a lot of talk about Chinese money, but you guys haven’t seen anything yet,” she said.
Australian houses and apartments, especially in Melbourne and Sydney, are at their most expensive yet.
“Australia can’t afford for property to have a hard landing. If housing prices bust, the banks will get hit hard. And then what is there? It’s in everyone’s interests right now.” Van-Petersen added.
A lot of interesting views here. What do you think?For more real estate and property news, browse through our Tradebusters Connect news.
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