Price Bubble Debunked
Despite talk of a housing price bubble, ANZ research shows there is little chance of a housing market crash this year. The bank forecasts prices to remain on hold or fall slightly, but not crash.
In its recent property market assessment, ANZ argues that gains in house prices have been driven by lower interest rates and an increase in household income.
The ANZ 'Australian Housing Chartbook' reports: "A combination of lower interest rates, falling house prices and rising household incomes has improved Australian house purchase affordability over the past 12 months."
"Despite the continued concerns about significant Australian house price overvaluation from some commentators, housing market fundamentals remain supportive."
This is backed up by ANZ compiled data on international house prices, rental yields and house price-to-income ratio comparisons - showing Australian house prices have not deviated from international trends.
HSBC Bank chief economist Paul Bloxham agrees that there is little to fear from a price bubble. In the recent HSBC global research report 'Australia in 2012', he states there are three main reasons why prices won't plummet: the majority of houses can service their debt; the undersupply of housing is growing at a greater rate than the decline in population growth; and there is strong demand for housing close to major urban centres.
"We remain unconcerned about the possibility of a large decline in housing prices this year," concludes Bloxham.