House prices have improved because of an under supply of housing across Australia, says John Mulcahy, chairman of real estate developer Mirvac.
He says he keeps getting asked about foreign investors and whether there’s a housing bubble.
“While we agree the level of activity in the sector has increased, and pricing has improved in certain geographies, we believe the primary driver of this is the fundamental undersupply of housing across the country,” he told the company’s AGM.
He says Mirvac continues to see demand from offshore buyers, particularly for apartment projects in Australia’s major cities.
For the 2014 financial year, foreign buyers made up 11% of all property sold.
The percentage who were real estate investors rather than home buyers, both foreign and domestic, was slightly more than 50% of Mirvac’s apartment sales.
This confirms official statistics which show investor loans currently making up almost 50% of new housing loan approvals.
“This is at the top end of our historical band,” Mulcahy says.
“However, we would need to see this reach much higher levels to suggest a bubble.”
“Investor activity is certainly buoyed by low interest rates, a view that property is a safe investment and a more cautious outlook towards general equities.
“But the key driver of higher pricing is driven primarily by a lack of supply, particularly in Sydney.”
Mirvac posted an operating profit of $437.8 million, a 16% increase, for the 2014 financial year.