Of late it seems as though the media is asking the following questions more and more:
- is Australian property overvalued?
- is the property market set for a correction?
- what will the Australian property market follow a similar trend to overseas property markets?
The July 2011 MLC Investment Insight magazine provides in depth look into the Australian property market and what lies ahead. The publication has been put together by Michael Karagianis an Investment Strategist with MLC Investment Management.
The publication notes that "the Australian housing market appears expensive on a number of international and historical comparisons, following virtually continuous appreciation over the past decade or more. A combination of poor affordability, overvaluation and rising mortgage interest rates are likely to undermine the outlook for house prices in Australia over the coming years."
"There are some 'special factors' which are likely to prevent the same catastrophic declines in house prices observed in the US over recent years. However, these are unlikely to prevent Australian house prices from experiencing a decline of perhaps 10-15% on average over the next 1-2 years. There could be significant variations around this expected decline across Australia. Longer term, Australian housing could deliver modest returns for the next five to ten years as prices stagnate."
"Housing has delivered apparently superior returns with lower risk compared with many other investments over the past 20-25 years. Housing currently makes up around 60-65% of gross household wealth in Australia, the same as 20 years ago. Based on a more cautious view of housing returns in the future, the exposure of Australian households appears excessive".
"Whilst the ideal exposure will necessarily vary depending on a household's individual circumstance, an exposure to housing of below 50% of gross household wealth on average would be preferable given lower expected returns."
To download the full MLC Investment Insight publication, click here.
It is important to remember that the above is one firms view only, although it is always good to hear all perspectives.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.