John McGrath says he's been misquoted by media, confirming "no chance" of 40% correction in Sydney

John McGrath says he's been misquoted by media, confirming
John McGrath says he's been misquoted by media, confirming "no chance" of 40% correction in Sydney

McGrath founder and real estate veteran John McGrath has said he was misquoted in a report that the Sydney market was 40% overvalued.

“The Sydney market is most of the way thought its sales cycle and very near the top of its cycle.

"My view is there is no bubble, and no chance of a 40% correction,” clarified McGrath. 

He had been misquoted saying he thought the Sydney market was 40 per cent overvalued, comments first published by Mortgage Business website, repeated on the Smart Property Investment site and then picked up by Business Insider, prompting a denial by John McGrath.

At the same time - and in the same article - he'd advised he thought there might be a  “small correction while the market catches its breath.”

The real estate expert had been attending the mortgage broker AussieThink conference on Monday on the Gold Coast where he sat on a panel with Aussie John Symond and banker Ian Narev, hosted by 2GB's Ross Greenwood.

He noted that there are “two housing markets” in Australia, and according to him the one that incorporated the two major cities of Sydney and Melbourne was at the end of its cycle.

“There are two markets in Australia, the Sydney/Melbourne market being one and the rest of Australia, and that could be broken into regionals and other capitals. If you look at the last 10 years, we have seen Sydney/Melbourne [prices] have doubled and we’ve seen most of the other capital cities increase by 10–20 per cent, so it really is a big separation of the two markets,” McGrath was quoted as saying by the Mortgage Business.

The report quoted him as saying that the two cities were “at least 95 per cent through their current cycle”, adding that “it could be 100 per cent in Sydney”.

“I don’t see any material capital growth in the next few years and, equally confidently, I don’t see any material drop either. I’ve been through five cycles and each time the market does see significant growth over a two- to three-year period."

“Yes Sydney is overvalued compared to other areas of Australia, however it is a world class international city and a major financial centre. I’ve long said that South East Queensland is undervalued and shows great growth potential,” said McGrath in a media release clarifying his remarks. 

He said the market had strong drivers including deep demand, population growth, overseas investment and low interest rates but there was a possibility of a small and short correction of a few percent, and “I believe that is healthy for the sustainability of the market”.

His firm's profit fell 42 percent for the year ended June 30 and the company announced a share buyback to support its sliding share price.

The Australian Financial Review's Street Talk column has written private equity firms are "circling" the company.

It advised Anchorage Capital, Adamantem Capital, Advent Partners and Crescent Capital Partners are among firms reputedly having run the numbers on McGrath.

Street Talk was not suggesting any approach has been made to the board, or that talks are under way ahead of a formal end to an escrow period - for about 46.3 per cent of total issued capital - on September 8. 

More than half of these shares are held by founder John McGrath, who retains the biggest shareholding with a 27 per cent stake.
 
"Once the escrow period ends as much as 20 per cent of the register could change hands, should founding agents and others opt to sell," the AFR suggested.

McGrath is speculated as potentially proceeding with a privatisation of the the nation's third-largest real estate sale business.

Tags: 
John Mcgrath Property Correction

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