IS the Australian property market about to collapse and the bubble burst?
Are our homes soon going to be worth 30 per cent or 50 per cent less than they are today?Well that depends on who you ask.
If you ask US based Jonathan Tepper, the founder of macroeconomic research group Variant Perception, it is not a matter of if, but when it will happen.
Mr Tepper predicted on the 60 Minutes television program on Sunday night that a drop in values of between 30 per cent and 50 per cent would hit the Australian property market.
But Australian property industry experts reckon he is way off the mark.
AMP Capital chief economist Shane Oliver has heard similar claims for the past 12 years and doesn’t put much faith in them.
“I am a bit amused,’’ he said
“I am not surprised that this story keeps getting wheeled out because it’s a good story in a way, there’s nothing better than a good old fashioned scare to get people to take notice.
“In a way I think it is a bit of a joke, this sort of story has been wheeled out almost continuously now since 2002, 2003. We had a big run up in property prices then and it did become a bit bubbly around that time and of course various people were inclined to think that property could crash. Even at the time I thought there was a risk it could crash, because we had gone up 20 to 30 per cent. Then as the years rolled on I began to realise and I think most people in Australia realised, that the Australian property market is a lot more complex and a lot more stable than people give it credit for and the reason prices don’t crash is because we don’t have an oversupply like America did at the time of the GFC.’’
Terry Ryder of Hotspotting said the claims were just regurgitating a very old story.
“I am acutely aware of it, because I did a research exercise towards the end of last year and what had been in media since year 2000 about real estate and what the outcomes were and found that those sorts of claims that the market was going to collapse and values were going to fall “x” per cent have just been a constant part of the media landscape for the last 15 or more years and none of them have come true and are very unlikely to.’’
He said such predictions were just ludicrous.
“Even the worst basketcase economies in the world post GFC have never had the sort of price collapses which have been predicted for Australia, we just don’t have those conditions.’’
He said while there would be small pockets or regional towns such as Moranbah in Queensland where values had dropped substantially, that was as a result of a set of circumstances exclusive to those towns and would not have the same affect across the country.
Mr Ryder said Australia had a very heavily regulated lending sector and lenders were extremely cautious, particularly since the Australian Prudential Regulation Authority (APRA) had tightened up lending conditions even more in the past year.
“You do have to jump through a lot of hoops to get a loan in this country,’’ he said.
Real estate expert Andrew Winter said commentators who expressed this kind of “drama” about the market were forgetting what the commodity was.
“This commodity is property, residential property and that is where all the calculations fail.
“For the simple reason is we can live without gold, we can even now live without oil, we can live without stocks and shares, we can live without just about everything now, but we can’t live without somewhere to live.
“There is this whole crowd of people who love to give the property market a hard time as it if it is a bad boy for making people money.
“The problem I have with that is if it didn’t as a nation we would be stuffed and so would a lot of other countries too.
“We have used it for the last century to backup our finances and now that is not just the big rich kids, the people with lots of properties, that’s your normal mum and dad.’’
“For someone to say it is going to go down 30 to 50 per cent and not say just in a mining town or just in a regional coastal area that had a penthouse released for $2m and they have all gone down 50 per cent or whatever, your general house in New South Wales and your general house in Queensland is going to drop 50 per cent, is not only just a headline grabbing thing, it is actually really dangerous.’’
Original Publish: http://www.couriermail.com.au/