You won’t find many disagreeing that the Sydney housing market is frothy. Australian Treasury Secretary John Fraser went so far as to say recently Sydney prices were “unequivocally” in a bubble.
But the question of where and when the top might be found has remained unanswered.
Today John McGrath, CEO of McGrath Real Estate and one of Australia’s most high-profile property experts, said in his weekly weekend auction wrap that the Sydney property market is “close to peak.”
Fairfax reports this afternoon that McGrath said the 80% clearance rate at auction over the weekend was strong but Sydney and Melbourne are 80-90% through their cycle.
McGrath, who was speaking at the Aussie Home Loans conference in Melbourne today, added that he would “be concerned if Sydney sees another double-digit growth.”
“I’m predicting 3 to 5 per cent more and then I think it’s going to be plateau-ing. Melbourne is probably about the same,” he said.
Echoing US economist Irving Fisher’s 1929 comment that stocks in the US had reached “a permanently high plateau” McGrath said he “wouldn’t panic about the market. Sydney has got a few per cent more, then it might come back a few per cent and then it will go to a steady state and ditto for Melbourne.”
That’s an almost bullish forecast in the current environment because it decries any talk of the “bubble” being popped. It’s not unusal though for a market insider to hold such a view.
But it’s a view also held by Aussie Home Loans founder John Symonds who told Fairfax: “I think it will fall out over the next six to 12 months where you might see 4 to 5 per cent (rise) in some areas, no increase in other areas. And then it will just flatten out for a few years. That’s Melbourne. I think Sydney is heading to the same place.”
Such an outcome would be most welcome for the economy and financial stability. But if there really is a bubble in some parts of Melbourne and Sydney then bubble theory tells us the chances of such an outcome are unfortunately somewhat remote.
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