No property bubble: Joe Hockey

Are we in a property bubble or not?

Well this week Treasurer Joe Hockey weighed into the argument prompted by the comments of one of his top economic advisers, Treasury Secretary John Fraser, who earlier in the week told a Senate committee that house prices in Sydney and parts of Melbourne were “unequivocally” in a bubble.questionmark house

On the other hand Hockey dismissed concerns about a housing bubble in Sydney and parts of Melbourne, saying the problem was one of supply and market forces would sort it out, saying:

“If there is a concern about elevated house prices, Sydney or parts of Melbourne, then the best way to respond is with increased supply,”

Mr Hockey said Wednesday’s quarterly national accounts figures showed “clear evidence” of a significant increase in housing supply meaning the market is responding.

The Treasurer said he saw no need for any more regulation above the current role of APRA that, since late last year, has tried to force banks to limit loans to property investors.

Another expert says “no bubble”

John Flavell, CEO of home loan experts Mortgage Choice, also came out this week saying we are not experiencing a property price bubble, however he did not deny the property market is hot in parts of Sydney and Melbourne. (How could he?)

Here’s what he said:

“To state that a property bubble exists in Sydney and Melbourne you would have to believe we will see a sudden and dramatic reduction in property prices over a very short period of time.

Property prices, like the prices for anything else, are driven fundamentally by supply and demand.

Is that going to change rapidly or significantly in either Sydney or Melbourne and cause a bust?
In Australia we have a modest rate of population growth driving modest increases in property demand.

We have had historically low levels of new construction keeping supply tight, especially in Sydney and Melbourne.

We continue to see high rates of urbanization, particularly in NSW and Victoria, as our population is attracted and retained by our largest cities given the employment opportunities and the amenities they provide.

If you are prepared to believe basic rules of supply and demand do not apply to the Sydney and Melbourne property markets, and if you believe the population is about to go backwards overnight.

If you believe that we will be able to manufacture new land close to the heart of our busiest urban centres, if you believe that we are all about to flee to the country and there is a fleet of trains that could take us there and if you believe we all want to move our families into studio apartments and forego our houses, then you just might believe that a property bubble exists in Sydney and Melbourne.

Property in Sydney and Melbourne is expensive, but it is not about to get any cheaper.”

There’s been so much discussion about whether Australia is in a property bubble that I wrote Australian Property Bubble: The Smart Investor’s Guide where I dissect 18 common arguments – click here to read it now.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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