No Australian housing crash, but market could stagnate for a decade: Residex’s John Edwards
Australia’s housing market is not heading for a crash but could undergo a decade-long period of stagnation with house prices declining in real terms, according to Residex CEO John Edwards.
Speaking to Peter Switzer on Sky Business this week, he said a stagnation in house prices was likely if “things continue to the way they are going and the government and RBA do not do the things they need to do” to stimulate a recovery.
“In real terms they are likely to fall marginally over the next decade,” Edwards said.
“A little pessimistic, I know,” he added.
According to Edwards, long-term stagnation only occurs during very severe recessionary or depressionary periods.
However, he said given what was happening in Europe and other parts of the world there could be a global crisis. “We have one now, but it could get worse.”
Locally, he says the key factor is the unemployment rate. But he tempered these comments by saying that even in periods when things go badly, property tended to do better than other asset classes. “The stock market is much more volatile – and you see something [like a crash] much more often.
“Housing remains the best in terms of investment and the lowest and safest risk option.”
Looking at the current capital city housing market, he said the bottom line was that the housing market had improved somewhat over the last few months.
But he said Residex data indicated the housing market was very fragile.
“It has been improving, but it has been in and out of correction in recent times.”
Residex has Australian house prices down around 1.4% to a median of $430,00 for the year to July and unit prices up 0.8% to a median value of $401,500.
Edwards said Sydney was now doing OK and Brisbane is “well out of its correction phase” but Melbourne “looks like it is about to enter a correction phase”.
Edwards said rental rates would rise substantially above inflation due to a shortage of rental property. “Across the market there are good places to be and bad places to be.”
“Generally the unit market is doing better than houses because of better affordability.
“This is the market that is going to perform best provided we don’t have oversupply issues like markets like Melbourne,” said Edwards.