John McGrath still positive, despite house price drop

McGrath CEO John McGrath has dismissed suggestions being made by some property experts that house prices in Sydney and Australia are 40% overpriced.

Writing on his blog, McGrath says: “There’s no need to panic. Every few years, these so called property experts come out of the woodwork to generate headlines about the Sydney and Australian property market being 40% over priced.

“I’ve been in real estate for almost 30 years now and have heard these suggestions on at least eight occasions (seems like once every cycle). To date, I have yet to experience a market that has fallen more than 20%, and invariably within nine months, any market losses have typically been regained.  In the meantime, property values have kept doubling about every eight years.”

However, McGrath has revised his forecast that Sydney house prices will increase by 8% this year.

In his Winter 2011 review he blames the stalling of house price growth on stock market jitters and natural disasters, but believes growth will return to the market “at worst by the first quarter of next year”.

According to the latest RP Data-Rismark Home Values Index, house prices in Sydney have fallen 1.3% for the year to date on a seasonally adjusted basis, and unit prices are down 0.4%

McGrath believes rising rents will spur first-time buyers into the market, and new laws allowing self-managed super funds to invest in property will “put an enormous amount of pressure” on property prices.

Currently though, he says fears of a second house price correction in the Sydney market is creating hesitation among buyers.

McGrath remains bullish about the upper end of the market, saying there is still “reasonably strong buying up to $2 million for the right properties”.

And well he should be.

According to the AFR, McGrath has put up a seven-bedroom property he owns in Sydney’s Duffy Forest for sale with an asking price of $5.5 million. He paid $4.7 million for it when he bought it just over two months ago, before undertaking some renovations.