{"id":4391,"date":"2015-05-12T01:00:39","date_gmt":"2015-05-11T15:00:39","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=4391"},"modified":"2015-05-12T01:00:39","modified_gmt":"2015-05-11T15:00:39","slug":"what-about-the-property-prices-in-this-cycle","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/what-about-the-property-prices-in-this-cycle\/","title":{"rendered":"What about the property prices in this cycle?"},"content":{"rendered":"

 
\nBarely a day goes by without another warning from some property pessimist, columnist or overseas economist about a looming price collapse. So let\u2019s get things straight up front \u2013 \u00a0there is no property bubble in Australia<\/a> <\/b>\u2013 at least not yet! And there is another point Michael Yardney<\/b><\/a>, from\u00a0Metropole Property Strategists,\u00a0wants to get straight as well and he does so in today\u2019s show. Hear what he has to say.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 I saw an interesting post on the Real Estate Talk just recently \u2013 a video from Michael Yardney about putting the property bubble into perspective. I want to go a little bit deeper into that today.
\nThanks for joining me, Michael.
\nMichael<\/b>:\u00a0 My pleasure, Kevin.
\nKevin<\/b>:\u00a0 Michael, what is a property bubble?
\nMichael<\/b>:\u00a0 Good question, because so many people are talking about it. Interestingly, high prices don\u2019t mean a bubble. A bubble is defined by a rapid rise in property prices where prices are way above their long-term fundamentals, and it\u2019s usually related to highly geared, highly leveraged speculators entering the market for short-term gain.
\nKevin<\/b>:\u00a0 What happened to property prices last year?
\nMichael<\/b>:\u00a0 When you look back, other than in Sydney, the property market was pretty tame. Sydney did particularly well over the last year, but Melbourne and Brisbane only had 5.5% and almost 3% growth. The other cities really didn\u2019t grow much more than inflation. That is not bubble territory, Kevin.
\nKevin<\/b>:\u00a0 What about the property prices in this cycle?
\nMichael<\/b>:\u00a0 If we go back to the post-Global Financial Crisis market, it bottomed in the second quarter of 2012, so now we\u2019ve had about three years of capital growth. The Sydney market has done particularly well. It\u2019s grown close to 40%. Melbourne market properties have gone up about 25%. Darwin did well, but has been slow the last little while.
\nOther than Sydney, house price growth hasn\u2019t been spectacular. The market is moving its way through but not into property bubble territory.
\nKevin<\/b>:\u00a0 Is it all about low interest rates, Michael?
\nMichael<\/b>:\u00a0 People say that, don\u2019t they? They say it\u2019s low interest rates that has encouraged everybody. But if you think about it, low interest rates are all over Australia. Clearly, cities other than Sydney and Melbourne have enjoyed the same low interest rates, yet their markets haven\u2019t been firing.
\nTo me, it\u2019s more about the local market factors: the strength or weakness of the local economy, consumer confidence or lack thereof as in some states, employment levels and job security \u2013 there is a bit of issue with that at the moment \u2013 and of course, the local property supply and demand factors. A lot more than interest rates, Kevin.
\nKevin<\/b>:\u00a0 What about high levels of debt and mortgage stress?
\nMichael<\/b>:\u00a0 Yes, people are talking about that and saying, \u201cLook how much debt people are taking on.\u201d But recently in its Financial Stability Review, the Reserve Bank found that low interest rates have made servicing of household debts much easier. The level of household financial stress in Australia, interestingly, is declining.
\nIn other words, there is actually less mortgage stress than there has been for a long, long time and there is only a really small percentage \u2013 just under 4% \u2013 of the total population whose mortgage payments equate to more than 30% of their income. They are the only ones who may get themselves into trouble if and when interest rates rise.
\nKevin<\/b>:\u00a0 Michael, when did the Australian property market last crash?
\nMichael<\/b>:\u00a0 If you look back according to John Edwards from Residex, it was in the 1890s, before Federation. The answer is we\u2019ve actually never had a crash in the modern era with a modern economic system and a modern banking system.
\nProperty prices slump. They slow down. They even drop in certain segments of the market. In regional Australia and more in the mining towns, they have crashed because they had a bubble. But if you\u2019re talking capital city markets, Kevin, not in a couple of lifetimes.
\nKevin<\/b>:\u00a0 Michael, accepting what you say about the lack of a bubble, what could cause our property markets to collapse?
\nMichael<\/b>:\u00a0 It has happened in the past and it has happened overseas, so why could it happen here? It could happen if we had such high unemployment that people would have to be forced to sell their homes and nobody could afford to buy them. That is what causes a crash, where you just give away your properties and there is nobody there to buy them. That is different to the orderly, slowly lowering of values or flat market values.
\nThe other thing that could cause it is terribly high interest rates, which could cause a raft of homeowners to default on their mortgage. That is unlikely, as well. A recession may, but it\u2019s unlikely because a recession lasts for one or two quarters and then moves on. You would really actually have to have a depression, and that\u2019s not on the radar, or in selective segments of the market, an oversupply \u2013 like is happening in some segments or in certain regional towns, particularly the mining towns. Again, that is not on the cards in our big capital cities.
\nKevin<\/b>:\u00a0 In summary, what is ahead?
\nMichael<\/b>:\u00a0 Each state is going to be affected by its local supply and demand and economic factors for the rest of 2015. New South Wales is likely to be the top performer because it has a strong and very diverse economy. Queensland\u2019s economy is now being helped by the falling dollar, and that\u2019s helping the export and the tourist markets. Victoria\u2019s economy is set for a bit of a decline because we are really a manufacturing state here, but strong population growth is helping drive the Melbourne property markets.
\nWestern Australia\u2019s economy is hurting a bit as the mining\/building boom is now fading. South Australia\u2019s economy is finally showing some early signs of revival, but it\u2019s going to be gradual and, I think, a very lengthy process. Tasmania\u2019s economy is likely to underperform, and the Northern Territory\u2019s resources-based economy is really still creaking.
\nWe\u2019ve got some good things happening but we\u2019ve also got some challenges ahead. I think we\u2019re going to have some very fragmented markets, meaning you have to do careful homework and lots of due diligence.
\nKevin<\/b>:\u00a0 As always, Michael, it\u2019s great talking to you. Michael Yardney from Metropole Property Strategists.
\nThanks for your time, Michael.
\nMichael<\/b>:\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Barely a day goes by without another warning from some property pessimist, columnist or overseas economist about a looming price collapse. So let\u2019s get things straight up front \u2013 \u00a0there is no property bubble in Australia \u2013 at least not yet! And there is…<\/p>\n","protected":false},"author":176692471,"featured_media":4394,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,25],"tags":[101],"class_list":["post-4391","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-sponsored-channels","tag-podcast"],"yoast_head":"\nWhat about the property prices in this cycle? - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/what-about-the-property-prices-in-this-cycle\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What about the property prices in this cycle? - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Barely a day goes by without another warning from some property pessimist, columnist or overseas economist about a looming price collapse. 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