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Housing bubble “non-existent”: leading economists

1 September 2014
Economists from the four leading Australian banks recently told the Australian Financial Review that the housing ‘bubble’ in NSW is non-existent.

Westpac Chief Economist Bill Evans said the growth in incomes over the past 15 years has kept pace with the growth in house prices.

“I think you get bubbles when house prices run well ahead of income growth and we just haven’t seen that,” Mr Evans said.

Alan Oster from National Australia Bank also agrees that there is no bubble and instead thinks the problem with Australia, should one emerge, will lie in unemployment.

“If unemployment in our models gets to around 8 or 9 per cent then you get the same problem as you’ve got everywhere else, but we’re undersupplied, interest rates are low, we think unemployment’s gone up but nowhere near 9 per cent, so no bubble,” Mr Oster said.

Warren Hogan from ANZ said there is certainly no bubble and believes the perceived expensiveness of our property market is, as much as anything, a social issue rather than affordability issues.

“We simply don’t have the speculative credit element there to describe it as a bubble. Low-income earners getting heavily ¬leveraged was the problem in the United States we don’t have that issue here,” said Mr Hogan.

Michael Blythe from Commonwealth Bank of Australia said that for it to be a real bubble you’d need to see increase in prices being driven by debt, but that’s not happening.

“No bubble. Housing credit’s running at the bottom end of the range the past 30 years. You need to see banks easing their lending standards as they chase more dubious borrowers that’s certainly not happening and you need a general expectation that house prices are going to keep rising forever. Now there is an element of that I think,” Mr Blythe said.

REINSW CEO Tim McKibbin has previously denied the theory of a property ‘bubble’.

“The increased figures developing around the ‘bubble’ speculation are not as severe as people may think,” he said.

“If you look over the last decade there has only been a 3 per cent growth in Sydney. We have been playing catch-up.”