Our property markets are rebounding, but no bubble in sight – Residex

The good news is that our property markets are bubbling along, but I’m amazed that there are already doomsters out there saying we’ll have another property bubble.

Sure the markets have rebounded, starting in the middle of last year and buoyed by in increasing confidence and falling interest rates, but we’re a long way off a bubble. Sydney is the only market to reach new highs and that’s of a base that didn’t increase for 5 years from 2013.

Here’s what John Edwards had to say in the latest Residex property market update…

 Markets are rebounding on the back of lower interest rates and a lack of available stock for those competing to purchase. In the last quarter, house and land values have increased by 0.59% on an Australian wide basis while units have presented an increase of 1.89%. Graph 1 displays the trend in the data, which is clearly presenting growth.

The growth trend evidencing itself in most major capital cities is not uniform (see Table 1). Additionally, some capital cities produced very strong results in May and June but have reverted to a price reversal in July. For example, Sydney houses increased in value by 4.5% in May and June but have posted -0.59% growth in July.

No bubble in sight

While there is a lot of talk about the market taking off and suggestions that we are about to experience another price bubble there is little evidence to support this. A more accurate statement would be that while the market remains fragile, it looks as though it is moving to a more normal growth phase.

A period of excessive price growth is unlikely as the economy is not strong enough to support such an outcome. We are also likely to see increases in unemployment, which will also encourage a level of conservatism within the community. Additionally, interest rates will rise from the current historical low point.

Despite low interest rates, affordability remains difficult for many people. However, affordability is at a much better level to what has been seen for many years.

Edwards the continues on to say…

  • Renting continues to be the more affordable option, even with interest rates at a historically low level. This fact will not be lost on many of our younger population.
  • Sydney remains the most unaffordable city while Melbourne is a close second.
  • Even though Adelaide is a low cost housing market, low wages makes housing somewhat unaffordable.
  • Cities where the cost of buying a home takes less than 28% of gross after tax household income can be considered an affordable market. It is the unit market that uniformly presents this outcome.

Investment in residential property is now a low risk option and provides much better returns than bank deposits. Additionally, it is reasonable to suggest that residential property investments are producing a real return equal to or better than the net rental. This is because rentals are likely to keep pace with inflation, as will the value of your investment property.

Given the above, as the market grows it is expected to mainly be driven by existing home owners and superannuation funds seeking out better low risk investment assets.

These people will make it very difficult for first home buyers to compete as these investors will be less constrained by affordability.

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If you’re serious about property investment please join me and a group of property and tax experts at my upcoming Property Market and Economic Updates  that I’ll be conducting in 4 states in August and September 2013

I will be presenting a heap of BRAND NEW content I haven’t discussed in public before. I guarantee there will be several things I reveal that you are not doing and you should be!

Click here now to get more details and reserve your seat.

Property & Econonomic Update

If you want to cut through all of the media hype, and all the contradictory predictions, and finally learn the truth (good and bad) about what is going to happen to the Australian property markets, this seminar is exactly for you…  Click here now to get more details and reserve your seat.

Michael Yardney

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About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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