Aussie John: What property bubble?

Aussie Home Loans chairman, John Symond, has dismissed talk of a potential housing bubble in Australia, and lambasted the RBA and analysts who think Australian house prices are too high.

He said, “I am confident, notwithstanding a lot of hype from offshore analysts about a housing bubble, of Australia’s fundamentals”, adding “Their argument is that most housing markets around the world have gone through a bust, so why not Australia?

As we reported earlier this month, The Economist has suggested that we are already in a housing bubble, with Australian homes priced 36% above their fair value.

Aussie John also criticised the Reserve Bank of Australia (RBA) monetary policy, after the bank suggested it was closely watching the housing market for signs of a new housing price bubble.

He said, “We have had a history of having very smart Reserve Bank governors but in the last two years, I have got to tell you, I think the Reserve Bank has been asleep at the wheel. They have left interest rates comparatively high. Well for the last 12 months, Blind Freddy could see inflation was not a problem, so why has the RBA been holding off?

Economics professor Steve Keen has also criticised the RBA, saying it had left interest rates too high for too long, which resulted in pushing up the Australian dollar, and hampering our exporters.

The RBA recently cut official interest rates by 0.25%, which may encourage consumers to become more active in the housing market, potentially pushing up home prices. That could be good news for the big banks, including, Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB), Westpac Banking Corporation (ASX: WBC) and Australia and New Zealand Banking Group (ASX:  ANZ), who have been struggling with low levels of credit growth.

Mr Symond believes that Australian house prices have bottomed, and strength of demand coming from Asia will help to underpin value in the housing market. Lower interest rates should boost people’s confidence, and the next few months should see a gradual increase in house prices.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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