Is a property bubble forming?

Editorial director of Switzer
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The residential property market continues to go from strength to strength, raising concerns that a bubble might be forming, at least in Sydney, where the auction clearance rate has surpassed 80% for the fifth week in a row.

On the weekend, it was as high as 83.8% in the NSW capital, as Melbourne recorded 71%, according to the APM figures (see table 1 below). RP Data had the auction clearance rates at 79.5% and 71.3% for Sydney and Melbourne.

However, UBS economist Scott Haslem says it’s too early to get too worried with housing credit at just 4.5%.

“I think the housing market is warming up. I think it is a little bit premature to call it a bubble at this point in time,” he says.

“I think the other thing is, volumes associated with these statistics are not necessarily that strong.”

RP Data’s combined city auction clearance rate hit 72% (see graph 1 below), which it says is the highest since the first weekend in June i.e. the June long weekend, which is typically popular with buyers. There were 1,405 scheduled capital city auctions on the weekend, up from 1,310 the previous week.

APM’s revised data for the previous weekend has the clearance rate at 80.3% for Sydney and 71.9% for Melbourne. Adelaide is also improving, with an auction clearance rate of 64.7%, although it has a minimal number of auctions (see table 2 below).

This time last year, all four capital cities on APM’s watch list had numbers lower than 60% (see table 3 below). Since then, we have had a full percentage point in cuts to the RBA cash rate, which is obviously having an effect on buyer activity, according to Haslem.

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