Predictions of a looming plunge in property prices are unlikely to come true any time soon, according to two of Australia’s most senior economists.
A round table forum, published in today's Your Money lift-out, has heard that while our house prices are among the world’s most expensive, “our own backyard is completely different” to the US and Britain where prices have fallen heavily in recent years.
CommSec chief economist Craig James said supply and demand issues would underpin property prices, but some areas would fare worse than others.
“We’ve got the fastest population growth of any advanced country in the world, and really up there with some of the developing economies, faster than a lot of the Asian economies,’’ he said.
“We’re not building enough houses, so there’s a housing shortage."
Since the global financial crisis began there has been a steady stream of experts forecasting a fall in house prices.
Last week a report from Flinders University in South Australia concluded that the nation's housing market is in "a very dangerous and unstable situation which has received little adverse attention".
House prices have climbed in every mainland capital city in the first seven months of this year, according to research group RP Data.
AMP Capital Investors chief economist Shane Oliver said the Australian housing was very expensive by global standards.
"For example, to buy an average house in Australia is about six or seven times the average household income after tax. In the US, it’s about two-and-a-half to three times, so we’re paying about double relative to our incomes what Americans are paying," he said.
"On the flip side though, we have a shortage of housing. I think the bottom line is that unless Australia has a major economic downturn it’s very hard to see the collapse in house prices that some people are worried about.
"And you also get the impression that the government is dead set on making sure that won’t happen."
However, Dr Oliver said people would have to be more careful about where they bought houses.
"If you’re out in the suburbs where demand might slow down a little bit because of slowing new household formation rates, you might not do so well. Alternatively, if you’re in lifestyle property, close to the city, around the coast, you might do a lot better as people move into retirement and focus more of lifestyle."
Mr James said Generation Y and migrants wanted to live closer to the city, which would fuel demand in those areas.
"If you’re living way out from the capital city centres and you’ve got a four or five bedroom house, perhaps you’ll be a little bit worried about the degree of house price accumulation that you’re going to get over a long period of time," he said.
