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Australian property market showing signs of bubble risk, academic modelling finds

Australian

Much of the Australian housing market shows indications of bubble risk, new modelling argues, after the return of investors and a fear of missing out has pushed prices higher than can be explained by low interest rates and other factors.

Property prices in Sydney, Melbourne, Brisbane, Adelaide and Canberra have outstripped the growth expected from fundamental factors, such as rents, interest rates, income, and housing supply, and are being bolstered by panic buying and speculation, new modelling by economics professors at Macquarie University and Yale University shows.

“While the interest rate is at its historical low and housing supply has dropped substantially in some cities, they cannot fully explain the fast-rising house prices in some cities,” said Shuping Shi, a professor of economics at Macquarie Business School.

The question of whether Australia’s housing market is in a bubble, or overvalued, has been a hot topic among economists as prices have soared, with many arguing that there is no way to know if asset prices are in a bubble unless the bubble bursts and prices fall sharply. Professor Shi stressed she does not expect property prices to fall substantially, although they might level off or fall slightly in future.

Professor Shi said the increase in demand is also being driven by some buyers purchasing out of fear that they will be priced out of the market entirely if values keep climbing at the current rate and investors counting on rapid gains to make a large profit.

 Australian

The fear of missing out if prices continue to rise rapidly is prompting more people to try to buy now. Photo: Peter Rae

Expectations of a “large and almost certain” profit attract more investors to the market and, combined with panic buying, could lead to a substantial jump in housing demand and an explosive expansion of house prices, she said.

Such factors played the biggest role in Sydney, followed by Melbourne and Canberra, according to the modelling, based on March figures. Speculative bubbles started first in Brisbane and Sydney in spring, followed by Canberra late last year, Melbourne, and even Adelaide in the March quarter.

One of the factors assessed to provide a “real-time bubble indicator” was a price-to-rent ratio, with Sydney seeing double-digit growth in a single month and Canberra recording its strongest increase on record, causing concerns for the general public and policymakers, Professor Shi said.

Hobart, Pert and Darwin, were also seeing speculative and panic buying, but not at a level that would indicate housing fever, Professor Shi added.

The modelling, available on The Housing Fever website, also covered six New Zealand regions. Canterbury and Auckland were both found to be in the grips of a speculative bubble.

“We can expect in the future that these markets will either slow down or see price decreases … and some markets would drop much more significantly than others,” Professor Shi said.

However, she stressed that, unlike in financial markets, property prices were more likely to level off or drop a little rather than see a substantial fall when a speculative bubble ended.

HSBC Australia chief economist Paul Bloxham said double-digit annual house price growth seemed to have run ahead of what fundamentals would explain for Australia.

“We expect that the housing market is going to cool over the coming quarters and running into 2022,” he said, noting ongoing border closures and stalled population growth would weaken housing demand and see price growth drop back to single digits.

The surge in demand brought about by record-low interest rates would also drop off, having worked its way through, he said. And with the Reserve Bank adamant that it won’t turn to negative rates, there are no more cuts ahead to fuel further demand and price growth.

Mr Bloxham added that while the market’s rapid rebound had been mostly driven by first-home buyer activity, it had more recently become an investor-led story.

“The more investors pile in, the more it’s concerning that it might start to become a bit more of a speculatively driven market,” he said.

“[But] we’re not expecting that there will be a need for prudential tightening. What we’ve observed is that lending standards … have all been fairly strict, and we think the housing market fundamentals themselves and, in particular, the closed border will be the main factors that will see the market cool.”

The Housing Fever website is aimed at providing independent modelling for policymakers, and Professor Shi hopes it can contribute to the ongoing policy debate regarding the rapid growth in house price by providing insight into the factors fuelling housing demand.

She noted it would also help individual consumers make decisions, showing whether they were in a speculative bubble and, if so, how long it had lasted.

 

Article Source: www.domain.com.au

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Brisbane

Bridge to 2032 – Brekky Ck span approved, missing link for Games athletes’ village

Brisbane is set to have another major infrastructure project underway by the end of the year after Lord Mayor Adrian Schrinner lodged the final design of the Breakfast Creek green bridge with planning officers for approval.

The $67 million project is likely to provide a smoother connection for pedestrians and cyclists moving between the fast-growing riverside development at Northshore Hamilton and the CBD.

The 80-metre arch will cross Breakfast Creek to connect Newstead Park with the existing Lores Bonney riverwalk which was part of the now completed Kingsford Smith Drive upgrade.

“This is a crucial step towards securing the final approvals we need to commence work on the green bridge that will provide a $67 million investment in local industry, deliver a new active transport options and create 140 local construction jobs,” Schrinner said.

“The Lores Bonney Riverwalk is currently used 2300 times a day, and this new green bridge will improve safety and increase capacity to the riverwalk by creating a continues walking and cycling connection.”

He said the Breakfast Creek project would join the now-approved Kangaroo Point green bridge as fast-tracked investments to create jobs as the city headed out of the coronavirus pandemic.

Brekky Ck

The council has also linked the project to the 2032 Olympics, saying it will be a “key connector” for the planned Athletes Village at Hamilton and provide a critical transport link for the Games.

Two other cross-river pedestrian and cycle links connecting Toowong to West End and St Lucia to West End remain on the council’s green bridge program books but are yet to be funded.

The council insists the remaining bridges need federal and state government funding to go ahead.

 

Article Source: inqld.com.au

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Brisbane

Green ‘Grand Central’: Cross River Rail unveils changes to parklands vision

Cross River

Developers of Queensland’s biggest infrastructure project, the $5.4 billion Cross River Rail, appear to have bowed to public pressure and moved to preserve more public space in its redesign of the city’s Roma Street parklands precinct.

The Cross River Rail Delivery Authority has confirmed it will allow more public open space in a revised development plan for the area.

A new development scheme for the Roma St precinct, which will contain the state’s most most important transport interchange (dubbed Grand Central) as well as the proposed Brisbane Live arena, identifies new green areas and more affordable housing than was originally planned.

The Palaszczuk government has insisted that the development of an underground Roma St station as part of Cross River Rail is a chance to revitalise an under-used part of Brisbane into a major opportunity for private investment.

The government expects that over the next 15 years there will be nearly 4200 new residents and more than 19,700 new workers within the 32 hectare Roma Street priority development area, bounded roughly by Wickham Terrace, North Quay and College Rd.

However, the delivery authority came under fire for giving over part of the Roma St parklands which houses a public car park and Brisbane City Council maintenance depot to residential and commercial development.

The authority now says under the finalised development scheme the precinct would have more “publicly accessible open space”.

“The existing 11 hectares of publicly accessible open space within the Roma St Parklands will not only be protected forever, but will be expanded even further by more than two hectares,” the authority said in a statement.

“The development scheme also provides for new social and affordable housing as part of new residential buildings parallel to the rail corridor, adding to the existing apartment complexes along Parkland Boulevard.”

“This scheme is all about renewing one of Brisbane’s most underutilised inner-city locations while protecting and enhancing the beautiful natural features that already exist. ‘

About 46,000 people each weekday are expected to use the new high-capacity underground station at Roma Street by 2036.

 

Article Source: inqld.com.au

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Brisbane

Brisbane Olympics to Push Property Market’s Limits

Brisbane

Brisbane house prices will hit the $1-million median well before the 2032 Olympics with suburbs near venues tipped to move up to $3.9 million.

Property projections from PRD Research indicate the median price would reach $1.7 million by 2033 and would be “immensely” boosted on the Gold and Sunshine coasts.

PRD chief economist Diaswati Mardiasmo said it was clear that hosting major events had served the property market well.

“The year after the 2000 Sydney Olympics, Newington (site of the athletes’ villages) and surrounding suburbs’ median house prices grew by 13.4 per cent,” Mardiasmo said.

“Median house price growth was not limited to the year after the Olympics. It grew by 38.5 per cent two years after, and 66.4 per cent three years after.

“The year after World Expo 88, South Bank and its surrounding suburbs grew by an average of 19.1 per cent and by 10.3 per cent after G20 Summit 2014.”

Brisbane property price predictions: Olympics 2032

Suburb 2011 2021 Projected Growth G20 Average
Hamilton house $824,000 $1,650,000 $3,990,670
Tennyson house $515,000 $970,000 $2,052,520
Chandler house $1,040,000 $1,600,000 $3,385,600
Woolloongabba house $623,000 $951,000 $2,012,316
South Brisbane house $805,000 $1,210,000 $2,560,360
Redland Bay house $450,000 $638,000 $1,350,008
Ipswich house $325,000 $435,000 $1,052,086
Herston house $697,000 $908,000 $1,921,328
Spring Hill house $950,000 $1,150,000 $2,433,400
Coomera house $353,000 $550,000 $1,163,800
Broadbeach units $463,000 $625,000 $1,322,500
Alexandra Headland house $570,000 $1,110,000 $3,348,760
Twin Waters house $651,000 $1,077,000 $2,278,932

^Source: PRD Research, AMP Pricefinder

“Bearing in mind the 2032 Olympics are still 11 years away, and based on how the Brisbane market is travelling, the potential to eclipse this price point is high,” Mardiasmo said.

“Regardless of the calculation method, the conclusion points us to Brisbane becoming a $1-million median house price city sooner rather than later. ”

Domain’s latest house price report showed median house price in Brisbane was $678,236, up 13 per cent annually.

Meanwhile, prices on the Gold Coast and Sunshine Coast hit $792,000, up 18.2 per cent on last year, and $825,000 up 23.1 per cent, respectively.

Domain chief of research Nicola Powell said at the moment, low listing numbers and interstate migration were driving the price hike.

“It suggests that upgrading homeowners are fuelling house prices, as well as interstate and expat buyers moving from more expensive cities,” Powell said.

Melbourne and Canberra officially joined Sydney in the $1-million home club in the July results.

 

Article Source: www.theurbandeveloper.com

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