Australian property market showing signs of bubble risk

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Nowadays most of the Australian housing market is facing bubble risk. In Sydney, Melbourne, Brisbane, Adelaide, and Canberra, property prices have outstripped the growth expected from fundamental factors, such as rents, interest rates, income, and housing supply., and are being bolstered by panic buying and speculation, new modelling by economics professors at Macquarie University and Yale University shows.

As per Professor Shi, buyers are purchasing which increases the demand. They are afraid that they will be priced out of the market entirely if values keep climbing. She said expectations of a “large and almost certain” profit attract more investors to the market and, combined with panic buying, could lead to a substantial jump in housing demand and an explosive expansion of house prices.Shuping Shi, a professor of economics at Macquarie Business School said, “While the interest rate is at its historical low and housing supply has dropped substantially in some cities, they cannot fully explain the fast-rising house prices in some cities”.This issue becomes a hot topic and every economist is discussing whether Australia’s housing market is in a bubble or overvalued.

According to the modeling, such factors played the biggest role in Sydney, followed by Melbourne and Canberra, based on March figures. Speculative bubbles started first in Brisbane and Sydney in spring, followed by Canberra late last year, Melbourne, and even Adelaide in the March quarter

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