Classifying either the Sydney or Melbourne property markets as a bubble is a fool’s errand according to one real estate analyst.
Eliza Owen, market analyst from onthehouse.com.au, believes a bubble’s existence can only be proven after the fact.
“Academia has never really developed what a bubble actually is, there are some characteristic we associate with bubbles; low interest rates, high levels of speculative investment and rapid growth, but that’s really it,” Owen said.
“When you look at the past bubbles we’ve had, we’ve only ever known we had one after they popped.”
In terms of Sydney, Owen is especially hesitant to classify its market as bubble given past events.
“If you look at the past bubbles in Sydney, there’s never been a giant correction in prices that you think of when you think bubble, there’s a period of growth and then prices stabilise,” she said.
“The last bubble in the mid-2000s, there was a small drop and then prices stabilised, you copuld probably even make an argument that Sydney’s never been in a bubble, unless we’re currently in the middle of a 30-year one.”
While Sydney and Melbourne have been experiencing growth levels not seen elsewhere in the country, Owen believes some of the prices being seen in those cities may reflect actual values.
“Some of the multi-million dollar sales we’re seeing in Sydney or Melbourne I think do genuinely reflect the values of those homes,” she said.
“If you’ve got an established home in the heart of Sydney, I think it’s understandable that somebody would pay that to live in area that’s close to everything.”
While Owen believes that properties further from the centre of those cities may not be selling for prices that accurately reflect their value, she believes that policy makers need to look at a more holistic approach if they wish to make housing affordable.
“In a situation like this it is important to review macro-prudential policies to make sure that if interest rates go back up we don’t get in a scenario where people can’t service their loans, which is why APRA has taken steps recently.
“But aside from that I don’t there’s too much else they can do, what we should be doing is looking at things in a bigger picture approach.
“Things like dispersion planning and establishing better regional centres that have the services and employment opportunities that will make people want to live there.”
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Top Suburbs :
Get help financing your investment
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out