Stick to the facts in property market

Posted on September 21, 2013 by | 0 Comments
Illustration: Rocco Fazzari.

Illustration: Rocco Fazzari

It seems the world is hitting the panic button that a property bubble is forming that if left to its own devices could wreak devastation on an already fragile global economy.

In Australia the regulators are making headlines with warnings to the banks not to be lax with their lending requirements, along with comments in The Australian Financial Review by former Reserve Bank board member Bob Gregory that a property bubble ”just seems to be inevitable”.

It is a similar story in Britain with the Bank of England planning to meet as pressure mounts on it to look at what it can do to prevent a housing bubble emerging, and in China, where property prices have been soaring, the Chinese government is clamping down on speculative and investment driven property demand.

Such warnings are necessary in some countries, but Australia isn’t there yet and when a few pertinent statistics are put into context then talk of a bubble starts to look sensationalist.

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It prompted the Reserve Bank’s assistant governor Malcolm Edey to step in and say such talk of bubbles in Australia was “alarmist”. He said looking back over the past decade, house prices have risen at a rate “equivalent to or on average less than the growth of household incomes”.

While it is true Australia has always been accused of having relatively high residential prices compared with the rest of the world, it is like comparing apples with oranges.

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