Lucky owners of homes in inner Sydney and Melbourne needn’t get too stressed about the threat of a property bubble bursting, says economist Janine Dixon.
Dr Dixon, a senior research fellow at the Centre of Policy Studies at Victoria University, said although she had a negative view of household incomes over the next four years, inner-city housing was “non-reproducible”.
“If you are fortunate to own a packet of land in inner Melbourne or Sydney, then you are indeed fortunate because the prices there are just going up and up”, she told a Melbourne Economic Forum on productivity growth.
“I think it’s difficult to break into that market from outside because the prices seem to be increasing at a much greater rate than household disposable income.”
Surging house prices in Sydney and to a lesser extent Melbourne, had prompted economic authorities, including the Reserve Bank of Australia governor Glenn Stevens, and Treasury secretary John Fraser to declare that Sydney was experiencing “crazy prices” and a “housing bubble”.
Prime Minister Tony Abbott and Treasurer Joe Hockey, both owners of inner-Sydney real estate, had shied away from the debate. Mr Abbott said two weeks ago he was happy for house prices to continue rising, and Mr Hockey advised young people wanting to break into the Sydney market to get a better paying job, drawing criticism they were “out of touch”.
But Dr Dixon said the considerations applying to inner Sydney and Melbourne did not apply to housing generally, and cited the rapid development of new housing outside of the major cities.
“Every time I go and visit family in the La Trobe Valley I see there’s a new suburb out there. And I understand that by 2030, they predict another million people – that’s a city the size of Adelaide – just out there in the western suburbs (of Melbourne),” she said
“On the matter of housing as a whole, I think there’s plenty of supply coming on line.”
She said there was plenty of construction capacity after the end of the mining construction boom which would help home building “so I am expecting to see more suburbs next time I go out to the La tribe Valley”.