Risk in spring property market

Brisbane took third place, with a relatively modest rise of 6. 9 per cent. "I don’t think we have a housing bubble overall, but there’s some froth in the Sydney market and some of the potential house purchasers need to be wary," says HSBC bank’s chief economist for Australia and New Zealand Paul Bloxham.

Minutes of the RBA board’s monetary policy meeting earlier this month make it clear - in equally moderate language - that policy makers are watching the market, but are nowhere near pressing the panic button. "Conditions in the established housing market … remained strong and while house price inflation across the country in 2014 had not been as rapid as over the second half of 2013, it had remained robust," the RBA said. "Auction clearance rates in Sydney had eased from their high levels in late 2013, although they had increased in Melbourne more recently.

Deutsche Bank‘s chief economist for Australia Adam Boyton says a simple comparison of measures such as price-to-income ratios is flawed, as countries have their own dynamics as well. "One thing that I think is flawed when we compare housing markets is that we do a price-to-income ratio and we compare it across every different economy and we simply draw conclusions and we say ‘Oh, it’s higher than what it was when the US bubble burst’," Boyton says. "Yet we don’t look at the quality of the underlying credit decisions, we don’t look at Australian law that requires a lender to take into account whether the borrower can service that requirement.

Brisbane, Adelaide and Hobart show the same pattern, while the number of houses sold has fallen this year in Perth, Darwin and Canberra. "While the change in price is an important market indicator, the number of transactions is also very important," says RP Data’s Robert Larocca. "It’s the throughput.

Read more here: SMH


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