Tick, tick, tick, tick, BOOM!

The Advertiser - Real Estate - - Mawson Lakes Boulevard, Mawson Lakesdown - ANTHONY KEANE

AL­MOST 21 years ago ac­tor Will Smith, aka The Fresh Prince, hit num­ber one on Aus­tralia’s mu­sic charts with the hip hop song Boom! Shake the Room. It only reached num­ber 13 in the US, his home coun­try, which may sug­gest Aussies have a fix­a­tion with the word ‘‘boom’’.

In re­cent months there has been plenty of talk of a hous­ing boom in Aus­tralia. It’s mainly fo­cused on the big­gest mar­kets of Syd­ney and Mel­bourne, which have had 16 and 11 per cent growth re­spec­tively in the past year.

How­ever, even Ade­laide’s hous­ing mar­ket is start­ing to show some signs of life, up 4 per cent year-on-year, ac­cord­ing to RP Data. But our prices are still only at 2009 lev­els, so any talk of a boom here is pre­ma­ture.

The prob­lem with us­ing the word ‘‘boom’’ all the time is that booms are usu­ally fol­lowed by busts, which no­body who owns real es­tate wants.

And it can feed on it­self, as buy­ers worry about miss­ing out and dive deeper into property — prompt­ing un­sus­tain­able price growth and re­sult­ing in the Re­serve Bank slam­ming on the fi­nan­cial brakes with in­ter­est rate rises — an­other thing that no­body who owns real es­tate wants. The RBA won’t fo­cus too much on what SA’s mar­ket is do­ing if it’s try­ing to cool down Syd­ney and Mel­bourne.

HSBC Aus­tralia chief econ­o­mist Paul Blox­ham has put the na­tional property price surge into per­spec­tive. He says while prices na­tion­ally are up 11 per cent in the past year, they are only 7 per cent higher than their most re­cent peak and have av­er­aged 4.5 per cent an­nual growth in the past five years — the same as their aver­age over the past decade.

‘‘Hous­ing prices are now ris­ing af­ter hav­ing fallen — so the up­swing in this cy­cle looks quite nor­mal at this stage,’’ he says.

Blox­ham says Aus­tralia is still not build­ing enough homes to cater for our pop­u­la­tion growth of about 400,000 people a year. If prices keep ris­ing strongly, things could get risky, and Blox­ham says a likely in­ter­est rate rise later this year should cool things down a bit.

Boom or not, prices are cer­tainly pump­ing up, so it pays to be pre­pared for fu­ture vo­latil­ity in home val­ues and in­ter­est rates. Anthony Keane is the edi­tor of Money Saver HQ, which ap­pears in The Ad­ver­tiser on Mon­days.

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