I remember a year ago- in October 2020 – in these regular chats Dr. Andrew Wilson and I called the beginning of this new stage of the property cycle.
But looking back over the first 9 months of this year, our property markets have performed even more strongly than anyone ever expected, with the rates of house price growth at levels not seen for a number of decades.
In fact, all capital city markets have already experienced double-digit capital growth so far this year and many locations will experience growth of more than 20% over 2021.
Of course, it must be remembered that the last peak for our property markets was in 2017, and in many locations housing prices remain stagnant over an ensuing couple of years and it was really only earlier this year that new highs were reached. 
Meaning that average price growth was unexceptional over the long term.
But over the last week or two, there seems to have been a sudden change of sentiment about our booming housing markets.
A sense of urgency has crept into the tone of those at the helm of our big banks, as the CEOs of two of Australia’s largest banks have sounded off about emerging lending risks.
Commonwealth Bank CEO Matt Comyn urged regulators to act ‘sooner rather than later to cool the hot property market.
Then ANZ CEO Shayne Elliott said borrowers were increasingly trying to overleverage themselves, with sky-high prices threatening to exacerbate wealth inequality.
And the International Monetary Fund even chipped in last week with a strong warning that surging house prices are impacting affordability and creating real concern for Australia’s economic stability.
So is this the beginning of the end of this property boom? Will our regulator step in and hose down our hot property markets?
These are some of the questions I’ll be posing today to Australia’s leading housing Economist, Dr. Andrew Wilson chief economist of My Housing Market in this week’s Property Insiders chat.
It’s interesting to look back 18 months ago when the heads of our big banks forecast that property prices would crash 15- 20 or even 30%.
Boy was they wrong about that.
Now, Matt Comyn, Chief Executive of the Commonwealth Bank, the nation’s biggest mortgage lender, is openly calling for moves to cool the same market in which the pink makes most of its money.
It seems that Comyn is worried that even though his bank benefits from strong house prices, any further escalation of prices against an economy where the GDP is going backward may mean deep trouble in the longer term for an economy where housing debts are already very high.
And this came as the International Monetary Fund warned that surging house prices have raised concerns about affordability and financial stability in Australia, recommending tougher lending standards and supply-side reforms to take the heat out of the market.
Watch this week’s Property Insider video as Dr. Andrew Wilson explains why there is simply no case for interference in our housing market
Amongst other things we discuss:
- Why the growing concern about the high debt-to-income ratios of home buyers is not really a problem at all.
- Although house prices in most capital cities will soar in 2021, even with the constraints of lockdown, however price growth has averaged a modest 4% per annum since 2017 – despite record falls in mortgage rates over that period.
- Monthly house price growth in most capital cities has halved over the past three months and continues to track downwards, notwithstanding a likely short-term bounce-back from Covid subdued early spring markets as restrictions are eased.
- The Reserve Bank does not have a role in setting house prices. In fact, it’s the RBA’s mandate to stimulate employment which at present means keeping interest rates low, which in turn stimulates our property markets.
- At the same time – the Australian Prudential Regulatory Authority, which is our banking regulator – is there to make sure the banks are operating soundly and there is no deterioration in lending standards.
- There seems little to be concerned about current lending practices as interest-only loans are essentially a non-issue these days, and with rental vacancies, at near-record lows, the market needs property investors.
More Aussies join the millionaire club as Australian household wealth reaches record levels
The facts are in, the average Australian is getting richer.
Australian total household wealth (net worth) rose by a record $735 billion or 5.8% to record a high of $13,433.7 billion in the June quarter. 
Despite all the challenges Covid has thrown at us wealth is up 19.7% on a year ago – the strongest annual gain in over 11 years.
Average (per capita) household wealth rose by $27,782 or 5.6% in the June quarter to a record high of $522,032 – up 20.3% over the year.
In fact, Australian households have never been wealthier.
The twin effects of rising home prices and superannuation balances propelled net household wealth and wealth per person to record highs.
A recent report by Credit Suisse estimates that as many as 1.8 million Aussies are considered to millionaires today, based on estimates of net household wealth.
And the number of Australian millionaires is expected to grow to 3,100,000 by 2025.
This week’s auction results – another weekend of strong auction results.
The first month of the spring weekend auction market is concluded with more remarkable results despite the burden of ongoing Covid restrictions in most capital cities.
Watch this week’s Property Insider video as we discuss how most Capitals continue to record generally strong results for sellers.
Sydney Auction Market
Sydney reported yet another boomtime auction clearance rate at the weekend with the early Spring market showing no signs of slowing down, despite a surge in listings.
Sydney recorded a preliminary auction clearance rate of 85.2% which was similar to the previous weekend’s 85.1% and well ahead of the 74.5% recorded over the same weekend last year.
Sydney has now recorded eight consecutive weekends with clearance rates above 80% and remarkably scored above 85% for every Saturday in September.
The following chart from Dr. Andrew Wilson shows the Sydney auction clearance trend:
Melbourne Auction Market.
Higher clearance rates but sharply lower listings from a locked-down Melbourne market.
The Melbourne weekend auction market has concluded a Covid challenged September with its equal highest clearance rate for the month, although listings have predictably again declined sharply.
The recent easing of strict property inspections restrictions however holds the clear prospect of a revival of auction numbers through October.
Melbourne recorded a preliminary auction clearance rate of 79.3% on Saturday which was higher than the previous weekend’s 72.3% and the 39.6% recorded over the same weekend last year when the local market was also drastically impacted by the lockdown.
The following chart from Dr. Andrew Wilson shows the Melbourne auction clearance trend:
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'Is this the beginning of the end of our property boom? | Property Insiders [Video]' have 24 comments
September 15, 2021 Errol
Are we still this optimistic about Australia and its future ?
Australia has changed a lot since this blog post was submitted.
Under “normal” circumstances, I would say “yes, Australia will bounce hardly”
But we most likely won’t be under “normal” circumstances for the mid to possibly very long term anymore.
I come from a communist country, and I lived the transitional period from full democracy to becoming a tyrannical regime.
There are many strategical similarities to what’s happening in Australia, but with different colors.
If we keep this path, we won’t be ok, things will change forever
“Profits” from real estate will become irrelevant when there are no freedoms.
Even if you get “vaccinated”
September 15, 2021 Michael Yardney
This blog is updated every week Errol – and yes, we’re still optimistic
June 2, 2021 Mike Schwarz
Dr Andrew Wilson – Question on Interest Rates
It is said that the banks have been receiving cheap funding from the reserve and this ends in June. They will then need to source funding on the global market which is markedly higher. This would suggest they will have no option but to raise interest rates.
Had you factored this into your view on interest rates?
June 2, 2021 Michael Yardney
Great question Mike. I know Dr Wilson has taken this into account from our private discussions. The banks will have to borrow overseas, but look what interest rates are overseas. Of course the value of the Australian dollar will be a factor.
Remember, the RBA is keen to keep interest rates low to stimulate the economy, increase business activity and jobs growth and eventually get unemployment down. They are not not going to pull the rug out from under us
April 25, 2021 Mark
Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
See household debt in Australia
https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
I am standing back and waiting for this supposed pandemic mayhem to cease ….
April 25, 2021 Michael Yardney
What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision
August 18, 2021 Bruce Mitchell
Hi Michael,
I don’t feel the question was answered, what’s GOING TO happen, up, down, you hint it’s not, but I agree with one of your comments above.
Interest rates are going higher, people have overspent and it’s gonna crash soon.
I’ve been wrong till now and hope I continue to be,
Tho it’s a time bomb waiting g and it’s gonna be bad but with opportunities opened.
You and all real estate keep talking it up, that’s your job, I just don’t agree.
Cheers
August 18, 2021 Michael Yardney
Bruce, with so many unknowns what’s going to happen in the short-term is very hard to forecast, but I tend to avoid forecasts and have expectations instead.
I expect we will have some difficult times and some good times, but I don’t know when they will occur.
I expect we will learn to live with the coronavirus, but I don’t know how long it will take, and I expect the underlying fundamentals will keep driving up our property markets, not because I’m in eternal optimist it because I’m a realist and I don’t fight the big trends.
April 2, 2021 Mary
@Joseph
Your comment about “Australia heading towards Japan” and being over 1T in debt
Have you seen this link lately?
https://www.usdebtclock.org/world-debt-clock.html
Australia is doing AMAZINGLY WELL compared to the rest of the world.
I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook
People are angry when prices go down
People are angry when prices go up
Can’t seem to win either way eh?
April 2, 2021 Michael Yardney
Well said
March 3, 2021 Jennifer
90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!
March 3, 2021 Michael Yardney
We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.
February 4, 2021 Raj Thakrar
Hi Michael,
It is too early to be generalist and say property prices will hike. There are number of factors in play here.
1 Due to lock down some sales were on hold
2 Government Incentive in play
3 Relaxed lending rule
4 Government incentive
Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.
February 4, 2021 Michael Yardney
Raj
The facts show property values are already increasing and have for 4 months. Yes this is driven by pent up demand.
Can they keep increasing? you may benefit from reading this: Property prices cannot keep rising at the same rate
December 10, 2020 Philip Lee
The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.
December 10, 2020 Michael Yardney
Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.
October 16, 2020 Joseph Battaglia
Michael your optimistic views irrespective of the true underlying data is disconcerting.
The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.
Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!
Are we going the way of Japan?
This QE is just irresponsible on all counts.
Over $1T in debt for such a small economy… come on, who are we kidding.
October 16, 2020 Michael Yardney
You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument
October 2, 2020 Dave
Dear Michael. Your articles are interesting
and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉
October 2, 2020 Michael Yardney
Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.
July 24, 2020 Martin
The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.
July 25, 2020 Michael Yardney
There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis
June 26, 2020 Alex P.
While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.
June 26, 2020 Michael Yardney
Alex, you are right on both counts.
Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.
Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets