Punting on houses simply bonkers

Posted on September 22, 2013 by | 0 Comments

ARE “investors” piling into the housing market, or “speculators”? One thing appears certain: wealthier Australians are buying houses and apartments from each other with increasing velocity, dissatisfied with the paltry returns on their bank deposits and are topping up their buying power with cheap loans.

How do we know this? Growth in total housing credit in the economy is still weak but auction clearance rates are matching post-GFC highs and capital city house prices are accelerating and now growing at a 10 per cent annualised rate. Meanwhile, first-home buyers’ share of new home loans granted has fallen to its lowest level in a decade and the share of loans for new construction has dwindled. APRA banking statistics show loans with low loan-to-valuation ratios have spiked.

Ordinary people are being priced out of the so-called “great Australian dream” by cashed-up older generations buying for themselves and their children. But those who’ve been priced out of the market should be far less upset than they probably are.

Buying a house is not an “investment” but speculation, and one that looks ill-advised given how far out of kilter house prices remain with their underlying return.

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