Is Australia really the fourth most overvalued property market in the world? | Michael Matusik

Australia has moved from fifth to fourth most overvalued global property market but the overall risk of a housing bubble has subsided, according the very debatable The Economist magazine’s 2013 global housing index.  Read more here.

On a personal income housing affordability measure, Australia ranks fourth behind France (34%), the Netherlands (33%) & Canada (32%) while on a rents measure, Australia ranks third behind Hong Kong (81%) & Singapore (57%).

The Economist calculates that Australian house prices are overvalued 24% (38% last year) against average personal disposable income & 44% (53% last year) against rents.

What a load of rubbish! 

Read here & here what we wrote about this stuff last time around.

I believe The Economist has an issue with the Australian property market because we hadn’t experienced a substantial housing bust (or correction) here like most countries in the developed world.

[sam id=34 codes=’true’]For mine, due to our different lending practices here (full recourse loans etc.) & high level of owner occupier property, we were extremely unlikely to see the massive housing corrections that they experienced abroad, regardless of what Steve Keen spruiks.

Also most economists struggle forecasting things like actual economic growth & interest rates let alone property markets.  Generally speaking, economists have a pretty poor understanding of the real dynamics & influences of property markets.

Some economists (among others) have criticised me of late as being “too close to the market” i.e. involved in marketing & some very select selling – and therefore, somehow not capable of independent thought or the tenacity to share it.

The irony is that it is this very coal face contact with the market that is the most important when it comes to better property analysis.

And as for an international economist – using a bunch of bland, internet-based, third-party data sources – to speculate on Australia’s property markets; please, give me a break!

It is real estate after all. 

You must do a site visit.  Walk the turf; kick the tyres; eyeball the vendor & quiz (interrogate) the salesperson.

Australia, also, has a culture built on doing whatever is required to protect the family home – when things get a bit tough overseas, they put the keys in an envelope & post them to the bank!

Finally,..

You cannot make comparisons between property & share markets.  They are completely different.

But maybe The Economist knows what it is doing.  It needs to sell its magazine & online advertising, after all.  Well, if it ‘bleeds it leads’ & sadly telling us that our housing is going (again) to ‘hell in a hand basket’ must increase the magazine’s circulation.

PS In addition to our rental stock being somewhat inferior when compared to our owner-resident stock – see hyperlinks – our negative gearing on investment properties (and, arguably, the 50% capital gains tax rebate if investment properties are held for over twelve months) also acts as a rental subsidy.  As a result it has always been more cost effective to rent than to buy an equivalent residential property.  And more on this murky ground in coming weeks.

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This Matusik Missive, like all of them, is commentary & not advice.  Readers should seek their own professional advice on the subject being discussed.
Michael is the director of independent property advisory Matusik Property Insights and writes the  Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.

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Michael Matusik

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Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


'Is Australia really the fourth most overvalued property market in the world? | Michael Matusik' have 2 comments

  1. June 3, 2013 @ 9:48 am Mahmoud

    I believe investment property in Australia is hugely subsidies by government through negative gearing and if government stop this support, property market in Australia will collapse overnight.
    Regards,

    Reply


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