AMP Capital chief economist Shane Oliver said it’s hard to ignore the view that Australian property is expensive and household debt is high.
“Our assessment is that the national property market is cooling since APRA’s measures to slow lending to property investors are clearly biting with lending to investors slowing,” he said.
“The Westpac-MI Consumer Sentiment survey shows a sharp fall in consumers’ assessment as to whether now is a good time to buy a dwelling, led by NSW. And auction clearance rates have slowed.”
Mr Oliver also noted that the claims around negative gearing, foreign and SMSF buying driving the problem don’t really stack up. “Negative gearing has been around for a long time, and while foreign and SMSF buying has played a role, it looks to be small; and foreign buying is concentrated in certain areas,” he said.
According to Mr Oliver, the fundamental factor for “overvalued” home prices is chronic undersupply across the country.
“High house prices combined with high household debt to income ratios suggest Australia is vulnerable should something threaten the ability of households to service their mortgages,” he said.
“As such the RBA and APRA have been right to try and slow the property market down.”
[Related: Reforms tackle housing undersupply]