The recent suggestions about housing bubble forming in Australia hasn't materialised and is unlikely to happen any time soon according to an expert.

John Edwards, CEO of Residex said that the current strong economy in Australia combined with the recent rate rises by the Reserve Bank of Australia has helped avert a bubble emerging particularly in Melbourne.

"I have recently been reading suggestions and arguments about a price bubble in Melbourne forming. I can see no evidence of this. Yes, houses are too expensive across Australia but that position is unlikely to change for at least a decade as it will take that length of time for governments to correct the stock shortage issues," he noted.

Edwards said the RBA interest rate increases are now having a slowing affect and the data is clearly showing that the rate of growth is moving back a little. 

"This in itself points to a "bubble" being avoided as the growth rate would need to be increasing for there to be the potential of any major problem. Our more than 170 years of data tells us that capital growth rates in the last 60 years are less each cycle and hence as property becomes more expensive, bubbles become harder to create. Having said that, we have to bear in mind, any long period of moderate growth with excessive bank lending with higher leverage being allowed or encouraged can lead to problems if the economic circumstance of the country turns down. Our banks are well controlled and governed so a rapid adjustment to our housing values to make them affordable looks very unlikely," Edwards stated.

 

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