Pockets of dangerous oversupply, but no housing bubble: Aberdeen

Pockets of dangerous oversupply, but no housing bubble: Aberdeen
Pockets of dangerous oversupply, but no housing bubble: Aberdeen

Despite the surge in prices in Sydney and Melbourne and the high indebtedness of Australian households, Aberdeen Asset Management said there was no housing bubble.

They initially said there was no housing bubble in 2015 and re-affirmed this view in a new research paper.

It was written by its Asia Pacific head of property research, Milan Khatri.

"We don't believe that the Australian housing market is in a bubble, " Mr Khatri wrote.

"The usual features of bubble-type behaviour such as broad synchronisation of price gains across a country, lax bank lending policies, reduced scrutiny of end-buyers, and indiscriminate investor buying, mostly appear missing.

"Moreover, while housing supply is high by historic standards it is far from being excessive, and appears to have already peaked.
"Certainly there may be pockets of the market where the dangers of oversupply are a real threat – such as CBD apartments – but any weakness is likely to be short-term in nature as new supply eventually falls back," he said.
However Aberdeen does view house prices as being broadly overvalued close to 10 per cent with "low interest rates no doubt help[ing] to support current valuations".

The Fairfax Media report noted Khatri said Aberdeen did not believe the Australian market was overheated in the same way that markets like the US, Ireland and Spain were prior to the global financial crisis.

Among the features that differentiated it from these markets were measures by authorities to prevent excessive lending on "loose terms"  through the restriction of high-risk loans like interest-only loans and reducing the pace of growth in investor lending to 10 per cent per annum.

He added that big price gains in Sydney and Melbourne reflected housing demand running ahead of supply while in other markets where price growth has been less pronounced supply and demand have been more in balance "with the exception of Brisbane".

Oversupply Housing Bubble


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