Real Estate Business: Are we in a Property Bubble?

real estate signIs Australia in the midst of a property bubble? According to the banking industry, record low interest rates in Australia haven’t led to a property bubble. The Australian Bankers’ Association recently released a report, Key truths on housing in Australia, which looks at the changes in house prices over the past quarter of a century.

“Our analysis shows that the recent rise of house prices in Australia is not unusual when compared with historical trends, and the current house price growth has not exceeded the peak rates we saw before the global financial crisis,” says association CEO Steven Münchenberg.

The association says Australia has recorded solid increases in both nominal and real house prices since the GFC but has not been the strongest market in global terms. In fact, Australian property prices rank well down on a global scale, according to the report. After adjustment for inflation, rises in Australia have ranked behind Hong Kong, Switzerland, Austria, Germany and Canada.

“Since the GFC, volatility in prices has increased, with two periods of quite marked national declines in prices followed by strong rebounds,” says Münchenberg. “Much of the recent focus has been on strong house price growth in Sydney, but over the past ten years the price increase in Sydney is unremarkable when compared to other capital cities.”

Meanwhile, the Reserve Bank is struggling to manage the two-speed economy while the government fails to lift productivity and cut unemployment. With Australia facing the highest unemployment rate in 12½ years, slumping business spending and deflation spreading around the globe, more RBA stimulus would seem in order. However, with many Australian housing markets reaching unaffordable levels, reducing rates will only exacerbate this further.

Do you think we are in the midst of a property bubble? Why not join in the conversation with us and let us know your thoughts by posting a response in the comments below.

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