SQM Research managing director Louis Christopher said the Reserve Bank’s monetary policy statement earlier this week made it clear that while Sydney was hot, the situation was mixed for Australia’s other capitals.
“We think [the statement] will put to rest talk of a national housing bubble. The RBA doesn’t appear to be too concerned about national house prices and it is looking at the market on a national basis,” he said.
“While house prices may be overvalued nationally to some degree, we aren’t seeing the sort of valuations that we saw back in 2003 that were way more inflated relative to incomes and GDP.”
However, Mr Christopher did caution that people are still paying a significant premium for property in Sydney.
“Sydney house prices are probably overvalued by about 25 per cent, but much less than the 55 per cent premium that we saw back in 2003,” he said.
Mr Christopher said the housing market is “largely in check”, except for Sydney and parts of Melbourne, and added that the RBA will be monitoring far more than just the property market.
“Low interest rates have fuelled other asset markets such as equities and commercial property, so this may put a brake on downward moves. So too will rising interest rates in the US,” he said.
“But then again, it all depends on the Australian dollar. The one thing the RBA clearly doesn’t like is the Australian dollar, which remains above 'fundamental value', much to its consternation.”