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Growth

Property bubble is 'bulldust': economist

by Brendan Wong10 minute read
The Adviser

A leading economist has dismissed the possibility that Australia is heading towards a housing ‘bubble’.

Speaking to The Adviser's sister publication Real Estate Business, senior economist at Australian Property Monitors Dr Andrew Wilson said the driving factors for a boom were simply not present.

“We’re not seeing price growth anywhere near the levels that we’ve had in so-called previous house price booms,” he said.

“The macroeconomic underlying factors are not conducive for a boom. We’ve had very modest wages growth in the economy at the moment, we have a low inflation economy that means low wages growth and low profit growth, the stock market has grown a little recently but it’s still very modest and still well below its 2007 peaks."

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Dr Wilson explained that comments made about the prospect of 20 per cent house price growth in Sydney over a year were "nonsense".

“That’s not going to happen,” he said. “We don’t have the drivers that will instigate that type of house price growth over a year and if we did, it would be the second highest ever recorded in Sydney – the highest being 22 per cent in 2002.

“It makes very exciting reading – the boom, the bubble – but it is the boom, the bubble and bulldust at this stage, and I think we will see a moderation in house price or housing market activity into the New Year given the prospects of a declining economy.”

Any shake-up to the economy, such as rising unemployment, would act as a moderator to house price activity.

“There’s no secret that a lot of what’s happening in Sydney is being driven by investors. We have that flight to yield, [which] is no surprise given the underperforming stock market, low deposit rates and house price growth,” he said.

“What we are starting to see coming through is a trend of diminishing yields – yields in Sydney look to be dropping below four per cent.

“Of course, that will be a disincentive for further investor activity, so that’s one of the stabilising factors that our housing market instigates to correct unsustainable price growth.”

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