One of Australia’s biggest mortgage groups has dismissed comments from a senior Treasury official that property prices are unsustainable.
Mortgage Choice chief executive John Flavell said it is wrong to claim a housing bubble exists in Sydney and Melbourne because there is no chance those markets will experience a sudden and dramatic fall in prices.
“Property prices – like prices for everything else – are fundamentally driven by supply and demand,” he said.
“Is that going to change rapidly or significantly in either Sydney or Melbourne and cause a bust?
“Property in Sydney and Melbourne is expensive, but it is not about to get any cheaper.”
Mr Flavell said low levels of new construction are keeping supply tight in Sydney and Melbourne.
“We continue to see high rates of urbanisation, particularly in New South Wales and Victoria, as our population is attracted and retained by our largest cities given the employment opportunities and the amenities they provide,” he said.
“Recent infrastructure investment in Sydney and Melbourne has been almost exclusively on roads with an acute lack of public transport linkages, which is driving our population further into city centres.
“We are wedded to the idea of the family home being three bedrooms and several bathrooms all sitting on its own block of land.”
Mr Flavell’s comments come after federal Treasury secretary John Fraser warned earlier this week that Sydney is “unequivocally” in a housing bubble, according to the ABC.
Mr Fraser told a Senate hearing on Monday he has no doubt that a housing price bubble exists with respect to Sydney.
“When you look at the housing price bubble evidence, it’s unequivocally the case in Sydney. Unequivocally,” he said.
“Frankly, whatever the data says, just casual observation can tell you it’s the case.”
Mr Fraser said a price bubble also existed in the higher-priced areas of Melbourne, but evidence of a bubble in other parts of Australia is “less compelling”.
Prime Minister Tony Abbott failed to endorse the idea of a housing bubble when asked about Mr Fraser’s comments during question time.
“As someone who, along with the bank, owns a house in Sydney, I do hope that our housing prices are increasing,” he told the Parliament.
“I want housing to be affordable, but nevertheless, I also want house prices to be modestly increasing.”