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One of Australia’s most respected real estate figures has spoken out against predictions of a 50 per cent decrease in Australian property values, pointing to one capital city’s recent auction performance as evidence of their inaccuracy.
McGrath chief executive and founder, John McGrath, cited Sydney’s second consecutive weekend of strong auction performance as proof that recently-aired predictions of an Australian property bust are wide off the mark. However, Mr McGrath acknowledged that the market is headed for a slowdown.
US researcher Jonathan Tepper received widespread media attention after his claims that Australian property prices are heading for a decline of between 30 to 50 per cent were broadcast on 60 Minutes.
In response, Mr McGrath pointed to auction clearance rates of nearly 80 per cent last weekend as proof buyers have given the story little credence.
“I think the market responded very sensibly on the weekend by ignoring the scare talk. There were 648 auctions in Sydney with a clearance rate of 76.9 per cent. That figure was driven by extremely strong results in the northern beaches, city, east and upper north shore.
“I think weekend buyers essentially reacted as I did, ‘they’ve heard it all before’,” Mr McGrath said.
Mr McGrath attributed Sydney’s recent run of price growth to a lack of supply, predicting the market is now heading for a slowdown.
“We are talking about a market that has been under-supplied for many years, and that has been one of the key drivers behind the increase in house prices.
“Now, thankfully we are beginning to see supply meet demand, and we can expect a slowing down in the rate of growth. Not a bust but a slowdown.”
Mr McGrath criticised Mr Tepper’s apparent ignorance of the measures in place to protect the Australian financial system from making the same mistakes witnessed in overseas markets.
“It seems every year an offshore expert takes a look at our property market and decides it’s headed for Armageddon.
“The fact is you cannot bring an American mindset into any analysis of the Australian property market as the authors of this report have done. It ignores the high level of prudential oversight applied by the banks in Australia which are amongst the best in the world and the fact that we do not have questionable financial products such as the non-recourse loans that allowed irresponsible lending practices in America.”
Mr McGrath also criticised the way in which Mr Tepper’s predictions were broadcast without consideration of their basis, and questioned the motivation behind airing such dire predictions.
“This doomsday report was published without offering a counter opinion to the supposed facts or conclusions and this is something that occurs regularly,” he said.
“Back in 2008, Professor Steve Keen gained national prominence on the back of his predictions of a 40 per cent fall in property values, but at least he had the decency to admit he was wrong.
“In future I would like to see a bit more scrutiny of these reports before they are published and a more robust questioning of the motives, particularly if there is potential to influence markets.”