As auction clearance rates remain at record highs, and activity on the real estate market in Sydney and Melbourne continues to go gangbusters, it’s inevitable that we hear increasing talk of a “bubble”.
The RBA provided some relief last week when assistant governor Malcolm Edey said such talk was “unrealistically alarmist”.
The problem with the argument about a “bubble” in Australia, particularly when it comes from international commentators, is that it ignores the substantial undersupply problem here, versus the opposite problem that caused the US crash.
That doesn’t mean that lending standards shouldn’t be watched closely, but in Australia loan-to-deposit ratios at authorised deposit-taking institutions are actually coming down. That ratio was 111% at the end of June 2013, compared to 112.9% at June 2012, according to APRA.
A hot Spring
There is still definitely heat in the market; the auction clearance rate in Sydney was as high as 86.3% on the weekend as Melbourne also surpassed 80 at 80.1% (see table 1 below). Rates for Adelaide and Brisbane are still low. The median auction price for Sydney houses also exceeded $1 million.
[1]The interesting thing about the updated results for last week is that Sydney’s original rate of 84.1% has been revised downward to 79.2% (see table 2 below).
[2]The combined capital city auction clearance rate, as calculated by RP Data is also edging up towards the 80% mark and was 76.2% last week, compared to 72% the previous week.
[3]This time last year, auction clearance rates were 20 percentage points lower than they are today in Sydney and Melbourne at 62.6% and 61.2% respectively, according to the APM measure (see table 3 below).
[4]Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Peter Switzer: When will this bull market run out of steam? [5]
- Paul Rickard: Regulator overkill – SMSFs outperform, despite ASIC criticism of size [6]
- Greg Fraser: Stock in focus – TPG Telecom [7]
- James Dunn: Buy Wine and Cheese for the portfolio as well as the plate [8]
- Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [9]