ANZ: What housing bubble?

Posted on February 1, 2012


“There is no Australian housing price bubble, says ANZ in its latest assessment of the Australian property sector.”

While many people have proclaimed that our housing market is a bubble waiting to burst, the ANZ denies all claims, with good reason.

“A combination of lower interest rates, falling house prices and rising household incomes has improved Australian house purchase affordability over the past 12 months,” say report authors David Cannington, senior economist at ANZ, and Paul Braddick, head of property research at ANZ.

You can’t argue with that. Last year did see a drop in the median price of houses by 5.2% and units by 4.2%. The December quarter however defied all odds and showed the resilience of the Australian property market, increasing by almost 2%.

With softened housing prices and lower mortgage rates conditions to purchase seem just right.

When looking at graphs, things dropping always seem like a bad thing, but with the above graph it’s actually a good thing for those looking to buy property. Housing affordability will improve. What is something that can push affordability out of reach? Increasing interest rates: The RBA has dropped rates over the past few months and look to continue the trend throughout 2012.

We can’t forget that sentiment is quite low. Cannington and Braddick point out:

“Soft house prices, weak housing market sales activity and tight credit conditions have dampened residential developer sentiment. Despite the recent interest rate cuts, weak housing market sentiment will continue to weigh on residential development activity through 2012.”

This can’t help but make me think of a quote by a man who many of you may well know.

“…be fearful when others are greedy and greedy when others are fearful.”
Warren Buffet

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