The Australian property market, while over priced, is not experiencing an investment bubble because the key ingredients to this phenomenon are absent, according to a leading economist.
"Housing credit rates have slowed right down, only at the moment they've grown to about 6 per cent. Also less than 40 per cent of housing finance today is going to investors compared to more than 50 per cent several years ago," AMP Capital Investors chief economist Shane Oliver said.
In addition he pointed out that this debt has actually been issued predominantly to older and wealthier Australians which is completely different to the US experience just before the sub-prime loans issue and global financial crisis arose.
"Also rental property vacancy rates are very low here. So America had a house price bubble and a house construction bubble whereas we've only had the house price bubble, we haven't been building enough and that's one of the reasons our prices are so high," Oliver said.
"Supply certainly does impact, and that's the final point, that on some estimates at the moment there is a 200,000 dwelling shortfall in Australia, which is basically why I don't see a crash coming," he added.
While Oliver didn't feel property prices would fall dramatically in the immediate or near future he did predict the market may experience a change in price behaviour.
"The most likely scenario is a long period of soft house prices much like we saw from the mid 70s up until the mid 1990s in real terms where house prices tracked sideways in real terms and incomes gradually caught up," he said.
