Binvested director Nathan Birch believes the prices are rising in Sydney and Melbourne because of the lack of construction during the global financial crisis, which now means the supply doesn’t meet the demand.
“What I see is the pent-up demand since the GFC, when there was no construction happening in Sydney,” Mr Birch said.
“There are people coming to the country who need houses, but no one’s been building them.”
Mr Birch believes the market peaked in 2003 then remained relatively stagnant, before beginning the growth we’re seeing now.
“Both these states [New South Wales and Victoria] have been flat for quite a long time; it’s been almost a decade since there’s been movement.
“I think it’s just playing catch-up. It’s like having a big elastic band, if you pull it backwards and let it go – it’s been held back for a long time and it’s just taken off to where it should be.
“People are saying investors are driving up prices, but I don’t believe that for a minute. To a certain extent they may be, but I don’t think there’s a bubble out of that.”
Despite some people believing a rise in interest rates would help cool the market, Mr Birch says it would do more damage than good.
“Interest rates have got no reason to move up apart from a bunch of people in Sydney saying that house prices are too expensive,” he said.
“If the interest rate was to go up that would ruin the whole economy, so I don’t see that happening just to fix the property market.
“From here the market will just taper off and stay where it is. I think it’s clear to run its course and plateau out.”