What Property Bubble?

Australian Housing Bubble – I Don’t Think So by The “Property Professor”, Peter Koulizos

There are a number of high profile doomsayers out there stating there will be a crash in the Australian residential property market. They range from the predictions of US investor and co-founder of global investment management firm GMO, Jeremy Grantham and Associate Professor Steve Keen of the University of Western Sydney.

Jeremy Grantham described the housing market as a “time bomb” and that prices would need to come down by 42 per cent to return to the long-term trend. Steve Keen, who had a wager (and lost) a couple of years ago that Australian house prices would drop by 40% is still predicting a crash in property prices.

I on the other hand, I don’t think that there is a housing bubble. One of the characteristics of an asset bubble is prices rising very quickly in a short space of time. The last time national house prices rose quickly was back in 2001 – 2003. Some states have had “mini-booms” since then but it is certainly nothing like we saw in the US housing market.

If we were to have a property crash, it should’ve been in 2004, straight after the boom. There was no crash but what we did experience was a general slowing of price increases for a number of years which brought some normality back to the housing market. Since this time, property prices have increased all over the country except for West Australia. The West Australian market experienced their boom a little later than the rest of the country and they are still experiencing a softening of house prices.

The one thing that we all have in common is that none of us has a crystal ball. I may be proven wrong but I sleep well at night knowing that Australia residential property prices are not headed for a crash.

Investors who hold well located property should also be sleeping soundly at night.

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