Futurist Phil Ruthven on whether the housing market is in bubble territory
Sydney has lived with an affordability ratio in the high range for a decade and a half, without dire things happening, Phil Ruthven, the founder of IBISWorld recently noted.
Ruthven, recognised as one of Australia’s foremost business strategists and futurists, agreed that Sydney prices seem to be well over trend compared with Melbourne.
He concludes that although the Sydney economy and that of NSW are doing well - "indeed the best in the nation" - that it may not protect it from a dwelling price correction in the year or so ahead, or a longish period of prices flat-lining until incomes catch up to restore equanimity.
He told readers of CuffeLinks website that Australia’s economy is not threatened by its world-leading dwelling prices.
Sydney has "lived with an affordability ratio in the high range (3½-4 times household incomes) for a decade and a half, without dire things happening."
"Yes, Australia’s household debt (mainly mortgage debt) as a share of GDP is one of the highest in the world, but manageable.
"And our corporate and government debt as a share of GDP are among the lowest, if not actually the lowest.
"Overall, we are not living too far above our means compared with most other developed nations."
But he signals Sydney as the stand-out loner among our capital cities.
Sydney is the odd-one-out given its prices are so far ahead of the second priciest market Melbourne. The two charts below suggest the degree to which Sydney prices seem to be well over trend compared with Melbourne.
He noted the difference was even more marked when comparing just apartments.
But he noted Sydney had been under-supplied for nearly a decade, whereas Melbourne had gone into overdrive, leaving Sydney over the past year a sellers-market (prices over-trend by 12-13%) and Melbourne the opposite: a buyers-market, with prices 7-8% under-trend.
He concluded that the indications are that price growth is abating as we head into 2017.