We are not in a housing bubble: Residex

By webmaster 16 June 2010 | 1 minute read

Despite widespread speculation that Australia is in the midst of a housing bubble, Residex chief executive officer John Edwards has said this is not the case.

According to Mr Edwards, the Australian housing market is starting to slow in an “orderly fashion”, indicating that the “risk of a bubble has abated”.

“The interest rate increases, I think can now be said to have been largely absorbed and those who were going to be excessively stressed from the first group of increases have probably largely exited the market or will do so very shortly,” Mr Edwards said.

“I suggest this as the number of Suburbs falling in value due to excess sale stock, where mortgage stress would be seen (those in the lower cost areas) are less than at the peak. The first wave peaked in February and since then it has been reducing. The impact of the next group of interest rate increases is starting to flow through. This will result in some moderate increases in Suburbs moving to negative growth.”

Mr Edwards said Melbourne is likely to be the most impacted by rising rates as it returns to a more normal growth pattern.

In the last three years Melbourne houses have increased by 42 per cent, which translates into an increase in wealth of $172,000 for the average Melbournian.

RP Data’s national research director Tim Lawless agreed that Melbourne should start to return to normal growth over the coming months.

“It’s doubtful we will see any cities around recorded sky rocketing value growth. The capital gains in the broader market place over the last 12 months have surprised on the up side and it stands to reason that with interest rates at higher levels and there being a strong likelihood of further increases in rates over the next 12 months and Government stimulus having been wound back that real estate market will move into a more moderate growth cycle,” Mr Lawless said.

“In saying that, it there are likely to be some regions that outperform. These are likely to be areas that are influenced by jobs creation in the resources sector (although these regions can be very speculative, particularly with the added uncertainty of the Super Profits Tax) and premium markets which are much less sensitive to interest rate rises and affordability pressures.”

We are not in a housing bubble: Residex
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