February 22, 2014
Harry Dent is wrong. The US demographer says Australia has a property bubble and prices will drop by as much as 50%. I don’t have a crystal ball but his reasoning doesn’t stand up to scrutiny. These are my personal thoughts….and I should emphasise this is not the view of Mortgage Choice.
Harry Dent came to Australia to promote a new book. He can pay a fortune in advertising to promote his tour or he can predict carnage in the Australian market and make the newspapers for free.
Harry Dent predicts a collapse in Chinese demand for Australian property. The most recent figures from the Foreign Investment Review Board show Chinese property investment during the 2011-12 financial year was worth $4.2 Billion. The Australian Bureau of Statistics recently reported the total value of Australia’s 9.3 million residential properties exceeds $5 trillion, so Chinese purchases are less than 0.1% of the market. I doubt even removal of the entire Chinese demand can cause a collapse in Australian property prices. By the way, the average value of a home is $537,000 using these ABS statistics. On this basis the Chinese are buying fewer than 10,000 properties per year.
The shortage of homes continues
The last report of the National Housing Supply Council’s prior to it being abolished in Nov 2013 said that there continues to be a housing shortage in Australia and the average annual increase in housing stock is only 1.5%.
Immigration won’t stop
Department of Immigration publishes statistics on people migrating to Australia. In the last 5 years the fewest immigrants has been 168,623. The forecast for 2013-14 is 190,000. On any assessment the demand for homes by these immigrants far exceeds the estimated Chinese demand.
Projections by the Bureau of Statistics say almost 10 million migrants over the next 50 years will help swell Australia's population to more than 40 million by 2060 and more than 50 million by 2100. Australian governments see immigration as the only real way to maintain tax receipts as baby boomers make the transition from the workforce to retirement, so is game to predict this will be reduced?
Chinese investment in residential property is tiny when compared with the demand for homes by an increasing population. Immigration will continue to underpin the demand for property in Australia over the long-term, notwithstanding local and global economic conditions may have a contrary impact on prices over shorter periods.