The word bubble has again been used to describe the Sydney and Melbourne property markets, this time by a senior government official.
Treasury Secretary John Fraser used the dreaded b-word to describe the Sydney market and parts of the Melbourne market at a Senate estimates committee on Monday.
“When you look at the housing price bubble evidence, it is unequivocally the case in Sydney,” Fraser said
“It is certainly, I think, the case in the higher priced areas of Melbourne.”
Fraser’s concerns weren’t only about the rising prices in Sydney and Melbourne, with the Treasury Secretary also revealing worries about the current record low interest rates.
“You have always got to be careful about interest rates and debt,” he said
“But it does worry me that the very low—historically low—levels of interest rates are encouraging people to perhaps overinvest in housing.
“And I am not talking just about buying houses; I am talking about investing in housing.”
While Mr Fraser’s concerns might be shared by the Australian Prudential Regulation Authority (APRA), which has recently indicated that lenders should tighten their markets, property investment experts aren’t
convinced of a bubble’s existence.
Amy Mylius, a buyers’ advocate with Melbourne based Cate Bakos Property, believes people can be too quick in their use of the word bubble.
“I think some people just use bubble as a way to justify their position in the market, if a property they wanted to buy a year ago is now too expensive, rather than change their strategy or brief they just the market’s in
a bubble,” Mylius said.
Mylius also believes Australia has a lending environment that is unlikely to allow large numbers of people to overextend themselves.
“The credit policies we have are quite tight and I think they’re only going to get tighter,” she said.
“Just because we have people at auctions spending more than they might have in the past, it doesn’t mean they’re all going to default.
“Spending more on a property doesn’t necessarily mean people have borrowed all that money, they’re often choosing to spend less on other areas and then spend their money on a house.”
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