The current Sydney and Melbourne property price boom has caused plenty of consternation at the Reserve Bank and APRA. Indeed, yesterday RBA Deputy Phil Lowe said he was worried that the changes to investor lending rules won’t slow demand fast enough.
But it could be worse according to the latest research from CoreLogic RP Data’s senior research analyst Cameron Kusher. Kusher said the current boom in Sydney and Melbourne property prices is “much slower than that recorded between the ‘boom’ period of 2001 and 2004.”
That begs the question. Does this mean property prices in Sydney and Melbourne could suddenly rocket higher or is there something fundamentally holding them back?
“With interest rates at all-time low levels, many may be thinking that this current boom cycle is the most robust they’ve ever seen. “Not so,” Kusher said. He told Business Insider the “fundamentals are overall weaker. Gains are narrow and the level of debt is much higher now,” than it was during the 2001-2004 boom.
Kusher also said he doubts “markets like Brisbane, Adelaide and Perth will follow and exceed the surge in values in Sydney and Melbourne. The fundamentals in those cities remain weak, high or rising unemployment, low job creation and weakening population growth.”
That’s a worry because recent internal RBA documents, released after a Freedom of Information request, showed the RBA is concerned the knock on effects any fall in house prices “is likely to be spread across a broader range of households than the investors that contributed to the heightened activity.”
It seems housing, like the economy, is not as robust as it could be. More RBA rate cuts seem almost certain.