EXPERTS SAY HOUSING MARKET IN MIDST OF BOOM, NOT BUBBLE
AUSTRALIAN residential property is in a price boom, not a price bubble, and although price rises are expected to taper off next year, they will not bust.
According to the latest economic forecast from investment bank HSBC, Australia has swapped a mining boom for a housing boom with a surge in new home construction helping to boost the economy, as well as ease the housing shortage and tame property prices.
“The housing construction boom has helped to fill the growth gap left by falling mining investment,” HSBC chief economist Paul Bloxham said yesterday.
“It has also helped to reduce a housing undersupply that had accumulated – not many houses were built during the mining boom.”
Despite national property price rises of an average 50 per cent during the past five years, the investment banker said this growth was based on traditional supply and demand factors.
“Just because prices and housing debt have risen does not necessarily mean that there is a bubble,” he said.
“The key question is whether the rise is in line with fundamentals.”
Real estate prices have risen very little in areas where demand has been weak, while in high demand areas prices have risen significantly, which supports the analysis of a boom.
Since mid 2012, prices have risen 6 per cent in Perth, 11 per cent in Adelaide and 21 per cent in Brisbane. These areas felt the brunt of the mining retreat and demand has been low. He said: “In contrast, Melbourne and Sydney prices have risen 60 and 80 per cent. In addition to low interest rates, demand has been supported by migration and foreign investment, factors strongest in Sydney and Melbourne.”