HOUSING MARKET IN STRONG POSITION

Despite the doomsayers forecasting a drop in the property market, high levels of equity and a strong labour market will eliminate the potential of any collapse.

While recent media reports have highlighted predictions of an imminent collapse in the housing market, particularly in Sydney and Melbourne, a tsunami of forced sales was extremely remote and much more likely to be a trickle, says RiskWise Property Research chief executive officer Doron Peleg.

“What we are finding is the greater the holding period in strong markets, the greater the equity people have,” Mr Peleg said. “Overall in Greater Sydney, based on CoreLogic data, the estimated equity is $588,000 for houses with a percentage of 127.5 per cent capital gains since a property changed hands and for units $325,000, with a median of 82.5 per cent capital gains.

In Greater Melbourne the median estimated equity is $405,909 with a percentage of 121.3 per cent capital gains since a property changed hands and for units $193,0102, with a median of 55.5 per cent capital gains.

“Add to that a strong job market in both Sydney and Melbourne, with an unemployment rate of 4.4 per cent and 5.3 per cent respectively, meaning people have stable incomes, it follows that even if the market does fall dramatically they are at least able to hold on to their properties for longer periods and, in the vast majority of cases, will be able to refinance due to the level of equity they have.”

According to the RiskWise quarterly Risks & Opportunities Report, NSW displays strong economic fundamentals while Victoria has the highest population growth across Australia, a solid economy and a healthy job market.

“The market is really not that bad, yes, there have been some reductions this year and perhaps there will be some more next year but it’s not as bad as has been made out,” Mr Peleg said

He said the potential of a Labor win at the next federal election and therefore likely changes to negative gearing and capital gains tax was more likely to have an impact across the entire country.

However, he said the RBA could in that case intervene in the market, if required, as it did during the GFC by cutting interest rates while state governments provided significant boosts to first home buyers.