Property Bubble? What Bubble. There’s no bubble.

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Today, if you were to google ‘property bubble’ there are lots of articles about the Australian property market, on the arguments about whether or not a property bubble is building, about to burst or still manageable. Australia is considered a developed nation and its property market is a very developed one, both in legislations, implementations and enforcements. The central bank of Australia said that there is no housing bubble in Australia but it is monitoring the surging property prices closely. The Reserve Bank assistant governor Christopher Kent said that prices of properties has been growing and most of the growth came from the investor market.

I seriously think this is not a price growth that is healthy if most of the growth is coming from the investor market. He said, ‘Don’t assume prices will always go up, don’t assume the price increase that we’ve seen in the past is a reflection of where prices will be going in the future and don’t always assume interest rates will stay low for the length of your loan.’ What a direct statement.  How high has prices risen? Well 16% in Sydney within past one year and 11% on average of all the capital cities. Double digits price growth to me is considered high because salaries seldom rise by double digits even on good years.

The Reserve Bank’s statement was supported by David Rees, head of Australasian research at Jones Lang LaSalle. He said, ‘although Australian housing was very expensive compared to much of the rest of the world, there was no housing bubble.’  He further elaborated that the price increase in Australia is mostly due to a few factors such as low interest rates, population growth and an undersupply of new housing.

A few of my friends in Australia owns their own homes. All of them, in the suburb. In other words, even with their Australian dollar salaries they could not afford a home inside the city, closer to where they work and they have to stay up to 1 hour away. Today, whenever you see advertisements on Australian property within the city, it’s more likely to be a studio unit and even these studio units are already well beyond what we can afford. It may be suitable just for students but for families, affordability is well beyond many. Yet, as all the experts say, there are no bubbles in Australia yet, at least not now. Let’s wait for the next ‘bubble’ report on Malaysian property market.

written on 18th Sept 2014

Next suggested article: Predictions on property bubble burst date

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