Market plateau does not point to crash, expert says

Home ownership can feel like one huge mountain to climb. Illustration: Terry Pontikos

THERE has been much talk of property bubbles and huge price corrections for Australian real estate of late, but a recent survey showed most of us are not convinced.

The latest Mortgage Choice data revealed 64.3 per cent of Australians believe the housing market will continue to perform the same as it has in recent years, if not better.

Mortgage Choice CEO John Flavell puts the bright outlook down to the Australian love affair with home ownership.

“This data makes it obvious that the majority of Australians remain upbeat about investing in property and will continue to buy and sell dwellings,” Mr Flavell said.

Recent CoreLogic data has indicated price growth has stagnated over the last few months, with values showing an upside of just 0.4 per cent across the capital cities during the quarter to November.

Mr Flavell said this has caused panic among some industry figures.

“Many market commentators are suggesting that this is the beginning of the end,” he said. “Some have even gone so far as to suggest we could soon see a property price crash across some of the bigger markets, notably Sydney and Melbourne.

“The reality is property prices are merely stabilising after a few years of runaway growth. This is something we have long expected.”

A plateau in price growth is a long way off a market crash, Mr Flavell pointed out.

“For a crash to occur there would need to be a number of economic factors at play,” he said. “Firstly, supply would need to be high enough that it exceeded demand. Secondly, the cost of borrowing money would need to rise rapidly, and unemployment would also need to reach dramatically high levels.

“Moreover, there would need to be a large number of people looking to liquidate their properties at the same time.

“If all those factors were to occur, a crash could be a possibility, but based on how our economy is travelling at the moment, it is fair to say that we are not in for a crash.”

ABS statistics show the Australian population continues to grow steadily; by 389,100 over the last year alone.

“All of those people need somewhere to live,” Mr Flavell said. “At the same time, interest rates are low and we expect them to stay lower for longer.”



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