House price growth expectation the only Australian housing bubble sign
The Commonwealth Bank of Australia chief economist Michael Blythe is right in saying that house price growth expectation is the obvious current sign of housing bubble-like behaviour.
"One area where you can see perhaps a little bit of bubble-like behaviour is house price expectations," he noted this week.
"The momentum is driving the view that prices have a lot further to run.
"So that's the bit we are watching most closely, but in broad terms it doesn't look like a bubble," he said.
There's now an index that actually monitors asking prices.
It shows Sydney vendors increased their asking price by 14% over the past 12 months, according to SQM Research’s Asking Prices Index.
The only city to record a decline was Canberra, where asking prices fell by 1.5% over the year.
Across all the capital cities, there was a 7.2% increase, managing director of SQM Research, Louis Christopher noted.
Interestingly the 14% vendor asking price increase neatly aligns with RP Data's annual Sydney 14.8% price growth. As an aside I certainly didn't see that actual increase in all markets across Sydney, so vendors would be ill-advised to move their individual asking prices matching with the medium.
But back to the bubble, for it to be a real bubble, Michael Blythe affirms there needs to be several tandem factors at work.
"You need to see more than just rising prices. I think you need to see firstly the increase in pricing fuelled by rapidly increasing housing debt.
"You need to see banks ease their lending standards. You need to see an expectation that house prices are going to rise forever," he said.
“Concerns about a housing bubble have lifted in tandem with dwelling prices,” Michael Blythe acknowledged in a recent commentary to CBA clients.
“The risk of a speculative price overlay highlights the concerns about rising investor interest in the housing market.
"But investor interest is a rational response to the environment created by central banks.
"Demand, which has been driven by rapid population growth and limited housing supply, is set to intensify as record low interest rates, courtesy of central bank policies, make buying more affordable but, in turn, fuel even higher house prices."
“Their (RBA) actions have encouraged a search for yield, lifted risk appetite and created an environment where asset prices rise,” he said.
But he concluded Reserve Bank of Australia macroprudential policies to limit financial system stress, another way of dealing with any potential housing price bubble, was a long way off.