No Australian housing bubble, but tough times ahead for property market: David Koch

No Australian housing bubble, but tough times ahead for property market: David Koch
No Australian housing bubble, but tough times ahead for property market: David Koch

The Australian housing market is not in a bubble, according to Sunrise breakfast host David Koch, who says the market will start to turn around once the economy picks up and investor confidence returns.

Koch says anyone following the property market might be left a little bit confused by “contradictory news headlines and expert opinions” but says the bottom line is that in the medium term, “the tough times for Australian property appear set to continue”.

He says “there’s no bubble to burst, but prices are unlikely to have increased of late either”.

“A sharp global economic downturn would ensure they stayed this way for a while yet,” Koch writes in a thought piece for Yahoo7 Finance.

“But once the green shoots of economic growth return, and with them increasing investor confidence, things should turn around.

“Further interest rate cuts, continued low unemployment, population growth and improving housing affordability will all help to support the house price growth when it happens.

“It’s just not happening yet,” he says.

Koch says while RP Data reported that Melbourne house prices rose 1% in June, there was also data released by SQM Research showing there are now a “whopping” 386,857 properties for sale across the country, up 6.4% from a year.

“All else equal, this points to softening prices”.

“Digging a bit further into the data reveals that Melbourne and Hobart in particular are facing tough times with 28% and 29% annual increases in stock levels respectively.

“Going back to Economics 101, the reports of increasing property prices in these supply flooded areas is a bit hard to fathom,” he says.

However, outside of Melbourne and Hobart, Koch says supply levels seem to be stabilising, although at a higher level.

“This should ensure prices remain subdued for a little while longer until interest rate relief entices a few more first-home buyers into the market and some more properties are cleared from the auctioneers’ books,” he says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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