If you think that the housing market in Australia is overvalued, you are not alone. In fact, just last month The Economist reported that home prices across Australia were as much or even more than 50% inflated. Even with the slight slump seen in the housing market during the past year or so that was not enough to shake Australia from the top spot. According to the report they are still beating out other countries like Sweden and France when it comes to overvalued home prices.
Australia Housing Market Has Risen Steadily
While other markets around the world, including the US have seen home prices plummet, many parts of Australia have seen amazing gains since 2008. Across eight of the country’s capital cities home prices are up 15% since the beginning of 2008 with Sydney reporting a 16% gain and Melbourne a 23% gain.
“We have a very overvalued housing market and even a small adverse shock can be magnified by a large adverse impact on property values,” said Gerard Minack, Sydney-based global developed markets strategist at Morgan Stanley (MS). Minack has said he believes home prices are up to 40% over valued.
Australia’s economy is robust and unemployment is low. This combination has helped to keep housing costs across the country at a premium. In the upcoming months, while prices may fall slightly there are no indicators that predict a housing market collapse.
Australia Gold Coast Seeing Prices Drop
There is one area where home values have actually dropped and that is the Gold Coast. The luxury coastal areas have seen prices recess slightly. In Noosa Heads for example, prices have come down by about by about 1/5th during the same time that prices have risen throughout the rest of the country. Additionally, North of Brisbane and Queensland’s sunshine coast areas have also slumped slightly. Higher inventory seems to be one contributing factor.
Looking Ahead To The Future
Will the housing market continue to flourish or will it start to even out? This is the question many Australian’s are asking, especially hopeful first time home buyers. Prices have risen in many areas so sharply that new buyers have been priced right out of the market. In fact, many potential first time homebuyers across the country are striking, saying they won’t buy until housing comes back to being more affordable.
Additionally, interest rates are expected to rise again later this year, maybe even twice. This should also help to slow down the housing market to more reflect current economic conditions.
So, Is The Market overvalued?
Most say yes and in fact 63% of Australians surveyed by QBE Insurance Group Ltd reported that they believe the market is definitely over valued. The survey also asked home owners how a rise in the interest rate would affect them. Just over 10% said that if rates rose by just .25% that they would struggle to make their mortgage payment and almost one quarter said that a .50% increase would mean that they would not be able to make their payment either. It is expected that some type of interest rate hike is in the works for later this year.
In conclusion, more than half of the country does believe that the Australian housing market is overvalued. At the same time however, that could soon be changing. As already pointed out some areas have started to fall slightly and with rising mortgage costs and first time homebuyers unable and unwilling to pay current market prices, indicators show that a slowdown might be is in sight.Back « Housing Crisis Looming for Australia: April 2011
I want to buy a unit in Brisbane.
I have $35,000 in savings.
I can save $12,000 by going without some things (like holidays, social life, hobbies other than reading library books) every year.
If I had a unit I could pay about $19000 pa, repayments, rates, body corporate fees etc. (Some of my money goes in rent.) I have over $100,000 in super as collateral. I have a permanent job I have been in for 15 years.
I could buy at today's prices but they do seem ridiculous. I would just prefer to wait and keep saving. I wonder how many others there are like me? The prices are just too high.
Save, save, save
The housing market is way over valued, I see some movements similar like in Europe where I come from,and where the housingmarket went down at least 20 percent, I am not buying yet, I'll wait till next year, the market will freeze, at the moment the builders still have a portfolio, but it is known that not many people get loans at the moment, so next year builders will have an empty portfolio , land will be cheaper, cos no one will build at the moment so no one buys land, all together, next year land and houses will be cheaper, renting will be more expensive. I have a lot of patience en even more savings.
I think I will wait. There is no point rushing in now. With all this talk of disaster looming I would just prefer not to risk it. Also I can save more if I wait another few years. That seems the best way to go.
i think australian house prices are toxic,i wouldnt touch anything until they come down to realistic values-the universal number is 3 and half times average wage of that area
Yes very overvalued, you can all blame old Johnny coward for that one. People don't understand the economy enough to speculate too much. Housing shortage equals high housing prices. An investor can get a good rent return on their property but don't need finance, first home buyers do. If you decide prices are too high and wait for them to drop overnight you miss out and have to rent someone else's investment, get in now and enable a stable future. In regards to the above mentioned repayments of $19 k a yr, dreamer. Get an education and a high paying job. Pay what ever you can afford over 10 years and restart again, never accept a 20 yr loan as the interest will kill you. I can now afford my second home at 35. Not too hard. Just sacrifice what you need for what you can afford. Market won't crash, gov won't help as they rely on the taxes, keep renting as I get richer!!!
This guy is spot on, Well done
HSV is as dimwitted as his name suggests...he is young and has only been exposed to a rising market like the rest of the fools who tout the same garbage...like you say you need to understand economies to be able to invest, housing is only one option and mainly for simpletons who DONT understand economies. Listen to this guy and you will all be in the red in the next 3 years if you dont do your sums correctly...and i know that hsv will be a interest only purchaser...who is dreaming ....ha!
I sold 2 houses 12 years ago because I was expecting a crash then, it didn't happen prices just went up. If I look back over the last 45 years I have owned Realestate there have been times when prices moved substancially up and down at certain times, but during that time money has inflated at an incredible rate, and this takes care of the sudden falls in the Realestate value in the long term. So the lesson is, don't be a succor like me and miss out, because at the end of the day, these experts are just people who talk through their hats like the rest of us.
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