Australia Property

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• Aug 25 2015 at 5:26 PM 
   
  
  
•  Updated Aug 25 2015 at 5:42 PM 
  

Euphoric buying is creating a housing bubble

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[img=620x0]http://www.afr.com/content/dam/images/1/m/h/q/4/b/image.related.afrArticleLead.620x350.gj6z9k.png/1440488541305.jpg[/img]Dr Shane Oliver dismissed the idea that foreign buyers were responsible for driving property prices up. Jim Rice
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by Su-Lin Tan
The property markets in Sydney and Melbourne have gone too far, AMP Capital Investors' chief economist Shane Oliver said at the Asia-Pacific Banking & Finance's breakfast in Sydney on Tuesday.
The market is overvalued despite higher property prices being driven by "fundamentals" such as demand from a growing population.
"Interest rates are at record lows and [are] lower than the 1950s - before Marcia Brady was born. The market has gone too far, is overvalued and there is a high degree of euphoric buying," he said.
Sydney property prices have risen close to 20 per cent in the past 12 months and Melbourne, 12 per cent. Since the last property low in 2012, dwelling prices have increased 30 per cent nationally, fuelling fears the market is overheated and heading for a crash.

Dr Oliver said a "bubble" was not just characterised by "flipping" – a term used to describe speculative buying and selling of properties.
"It's quite hard to flip in Australia given high selling costs. But all the signs are there – 'fear of missing out' has set in and buyers, particularly in Sydney, have become irrational," he said.
But while the Australian "property bubble" will not burst, Dr Oliver said the buying frenzy must slow.
ANZ's chief economist, Warren Hogan, said with no rise in interest rate imminent, it would be up to the Australian Prudential Regulation Authority to curtail bank lending to borrowers in order to tame the market.


Dr Oliver also dismissed the idea that foreign buyers were responsible for driving property prices up.
"They're just the sideshow, just as self-managed super funds and negative gearing are. They are contributors but the greater problem is the lack of supply of housing."
CoreLogic RP Data's head of research Tim Lawless backed the view that while foreign investments have increased they were mainly in the luxury and apartment sectors.