Larry Schlesinger | 18 November 2012

No housing bubble and no housing crash likely: Michael Yardney

Property analyst Michael Yardney says there are four fundamental reasons why the Australian housing market is unlikely to crash with Australia’s high rate of mortgage-free property ownership another factor protecting the market.

Michael Yardney, director of Metropole Property Strategists,  says people who blog in hope or expectation of a housing crash are probably “jealous of those who have worked hard and built up some assets”.

Speaking as part of a realestatetalk.com.au podcast, Yardney says that while a housing crash cannot be ruled out entirely – it could possible happen one day – the four things that would need to happen for this to occur are unlikely to eventuate.

These four things are: a recession, extremely high interest rates, a high rate of unemployment and an oversupply of housing.

Before going on to explain how none of these four factors apply to Australia, Yardney highlighted that the “main reason” house prices won’t crash is that currently the housing market is underpinned by the fact that 50% of home owners have no mortgage against their home.

“Therefore high interest rates and recessions aren’t going to make them sell.

“It’s the only investment market controlled by non-investors,” says Yardney, in comparison with overseas markets where there are a lot more tenants, where people move from state to state and from country to country and where the banking rules are different.

“In Australia the things that could make a difference are [firstly] a recession

“People suddenly lose their jobs, unemployment is high and people can’t afford to keep their mortgages.

“But nothing suggests Australia is going to have a recession in the immediate future.”

Extremely high interest rates are another thing that could cause a crash, but Yardney says no one is suggesting that is going to happen in the forseeable future.

A high rate of unemployment would create a situation where people have to “give away their homes – sell them at “silly prices” and could cause a crash.

But, Yardney contends “everybody who wants a job can get a job at the moment” though it may not be the job they want”.

And the fourth factor is “significant oversupply” as was the case in the US housing crash.

“No doubt it is happening in some markets such as the Gold Coast and some of the off-the-plan markets, but overall there is not a huge oversupply.

“[So] I can’t see the Australian property market crashing in the foreseeable future.

Yardney says the housing market has corrected by between 5% and 7%, but says such a fall is not a crash, but part of a cyclical downturn.

“For a crash you need a 15% to 20% fall."

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