No such thing as an Australian housing bubble: Rory Robertson

Outspoken economist and consistent housing bubble denier Rory Robertson says those who continue to rent in the hope that prices will crash are backing the wrong horse.

Responding to commentary from Deakin University academic Philip Soos that Australia has a housing bubble, Robertson labelled him “a know-it-all preaching doom and gloom”.

Writing for academic blog The Conversation, Soos, a researcher at Deakin University's School of International and Political Studies, provides four key arguments that point to a housing crash in the near future.

Firstly, he provides numerous examples to show that not having non-recourse borrowing in Australia (as exists in some states in the US and other parts of the world) has little bearing on preventing a house price crash; secondly he says historically house prices in Australia have crashed eight out of the nine times after there have been housing bubbles; thirdly he says a housing shortage is not causing house prices to rise; and lastly says Australian banks have not been conservative lenders, which is why we have mortgage debt of $1.2 trillion.

Writing on Business Spectator, Robertson admits that the days of “easy capital gains” resulting from “the big structural downshift in inflation and nominal interest rates in the early 1990s and the big structural increase in credit availability as banks were deregulated” are over, but he denies that Australian households are excessively geared because “even now, only about one-third of households have a mortgage (one-third own outright and one-third rent)”.

“In any case, the fact that average home prices are unlikely to surge higher from here does not mean they are destined to collapse. With the one-off structural shift higher now complete, average home prices will tend to rise and subside in cycles over time,” Robertson says

“The most-likely scenario,” Robertson says, “is that real home prices will trend gradually higher over our lifetimes as real incomes rise, and two-thirds of our population continues to compete aggressively to live on the best-located bits of ground near the CBDs of our seven coastal capitals and Canberra.”

He says many of the “doomsters don't actually know very much about local housing and home lending markets, don't own their own home or – commonly – both”.

“Meanwhile, most everyday people choose to buy a home they can afford to fund with a mortgage; then show up to work and happily pay their mortgage for the next 25 to 30 years. Over time, they enjoy a secure home within which to raise kids, and later on have a buffer that protects them from poverty in old age,” he says.

“Ask the dopey bubblemen about how much of their old-age pensions will be left for living expenses (including tasty dog food?) once (expensive) rent is paid. If they had a clue, the know-it-alls would realise that the relative tightness of rental markets – capital-city rent increases have averaged 5.8% per annum over the past five years – is a hint they are barking up the wrong tree.”

“Good luck to those sitting ‘short’ and renting while waiting for home prices to collapse. Just make sure you don't hold your breath.”