Bubble Predictions Meaningless for Perth

Damian Collins, in an article for the Property Update, dissects the truth behind the rumour called the “Perth property bubble”.

Housing affordability

There has been an ongoing debate whether the market is bursting at its seams and if it is due for a big correction. The Perth real estate is not showing any unsustainable growth in prices and there are no housing affordability concerns in the pipeline. Collins categorically points out that the different cities in Australia behave differently and the overheated situation manifested by Sydney and Melbourne does not mean that Perth is also in the same position.

Debt servicing

Debt servicing ratios are at easily manageable levels and we are not overtly burdened by loans. This is one surefire way to establish we are not in a bubble in Perth. On top of this, a value growth of 4.3%, averaged out over 5 years, only strengthens the anti-bubble argument.

Resilient market

The market fundamentals are so strong that Perth has beaten the bubble predictions many a times. 1987’s stock market crash, trepidation associated with 9/11 and the GFC has not been able to deter Perth’s resilience.

You can read the original article here.

Real estate rebound

In my opinion, even the apparently overheated markets of Sydney and Melbourne are nowhere near a crash. Those markets which are overvalued have been so because of the rebounds in real estate and not a perceptive ‘boom’. Contrarily, there are ample of undervalued homes to belie any doomsday predictions.

Median price and income

Median house prices are sticking in the vicinity of the median household incomes. Sign of an economy in its consolidation phase, one supposes! I know there will be people arguing how they had to pay far less to procure a home a decade ago. They will however have to concede that they earned a lot less a decade ago, too, thus offsetting the purchasing power. Growth always has to be considered in ‘real’, inflation-adjusted terms.

Developer frenzy

Even the smell of a bubble has developers rushing for cover. The developers, on the other hand, have been working in tandem with the labour market and undertaking constructions aplenty- as can be witnessed across Australia.

How are we in a property bubble then?