Why this expert is relaxed

This property expert believes that a crash is unlikely thanks to strong population growth.

A few people are worried that the current downturn might fall into a full-blown crash.

Shane Oliver at AMP reckons it’s unlikely. He says that maybe property is a fraction overvalued at the moment, but since population growth remains so strong, serious price falls remain very unlikely.

He had an interesting pack of charts. The first compares current property values against their long run trend.

On that measure, property does seem a tad overvalued right now, but nothing extreme in the scheme of things. Definitely nothing that points to a huge correction.

But Oliver also notes that the game has changed. Right now, population growth is booming thanks to strong immigration. Construction is also up, but not in a way that can offset the population surge, and construction has started to fall now anyway.

All that means is that supply is not keeping up with demand. And if current trends continue, with population growth remaining elevated, and construction levels winding back, that should put further pressure into prices.

That said, he does see Sydney and Melbourne coming further off the boil. In those cities, momentum is still down. That might not translate into price falls in Melbourne, but falls in Sydney will continue for a little while yet.

It does also look like Perth has put its worst days behind it now too.

On the whole, I’d agree with all of this. Momentum in the market has softened, but overall, the fundamentals (particularly the demand/supply balance) remain very supportive for property growth going forward.

I know there are people out there just begging for a property crash. But the experts (including me!) just don’t see it happening.

Spiro Kladis
Managing Director, Cashflow Capital

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