Beware of house price corrections, warns ANZ chairman

by Julia Corderoy04 Sep 2014
Careful; the house price boom is going to end – that’s the message that ANZ chairman David Gonski is giving to homebuyers and investors.

The caution comes after statistics released by RP Data this week revealed that capital city house prices have experienced significant increases over the past decade. In the last 12 months alone, Sydney has experienced over 16% price growth and Melbourne prices have climbed over 11%. 

Speaking at the British Australia Chamber of Commerce, Gonski said home buyers and investors mustn’t be so optimistic about capital gains.

"There will come a time when there will be a correction," Fairfax Media quoted Gonski. "The fact is, anyone who believes prices always go up is, I think, a fool."

The looming prospect of a property market correction has been a focus of the Financial Services Inquiry – with APRA, the Reserve Bank and regional banks all submitting concerns to the Inquiry about the consequences a market correction might have on the big banks, as competition in the mortgage lending sector has been on fire.

However, Gonski claims that the big banks are “very aware of history” when it came to financial lending in the residential mortgage market, Fairfax reported.



  • by SEQ BRoker 4/09/2014 10:07:17 AM

    Come on David!. Okay so we likely wont see 100% increases in house prices every 10 years like what has happened historically in cap cities in Australia since records began. But given the inflation rate of 3% per annum (average) and where house price doubling is an effective compound rate of 7.2%, the actual figure will be somewhere in between those two. For long term investors bricks and mortar will always be a winner because of that alone, aside from numerous other factors. Have a look at corrections. Last decent one was because the government was offering $21k incentive which artificially inflated price. I dont see no artificial inflation, just price increase due to demand which is congruent to normal increase in price.
    When are one of you economists going to write something like, "well, we havent seen any decent growth in property for a number of years - expect some!". Which was the case up until last year. You have been schooled.

  • by Colin Rice 4/09/2014 11:01:22 AM

    Population continues to increase (combined with money being cheap) therefore demand for housing continues aka supply and demand. Where are the fundamental underpinnings for the authors comments?

  • by Incognito 4/09/2014 11:04:50 AM

    Tax breaks are propping up the housing market.

    If so it's a rediculous entitlement.

    If not then remove the breaks and help the budget.