Fidelity banks and property analyst Anita Costa told advisers in Sydney yesterday that while she is concerned over housing affordability levels in Australia, there is no property market bubble.
Speaking at the 2010 Fidelity Investment Forum, Costa argued that Australia's lofty house prices to income ratio, used by many commentators to predict a major plunge in property prices, has been overstated
"The data that the doomsayers use is flawed.
They are comparing capital city house prices with country income. They are using breadwinner income rather than household income, and they are only looking at salaried income as opposed to other earnings including rents and dividends," she said.
Adjusting for these factors, Costa said, gives a house price to income ratio of around 4.5 to 1 for Australia, which, while still considerably higher than levels in the US, is significantly lower than parts of Asia including Japan, Hong Kong, and Singapore.
"For house prices to fall of a cliff we need to see a pick up in unemployment and I don't think that is likely, unless of course China rolls (over)," she said.
Fidelity's head of Australian equities Paul Taylor reaffirmed his belief that a double dip recession in the US is highly unlikely given the strength of corporate cash flows and balance sheets.
Taylor pointed out that in previous major market downturns, such as 1987, 1973 and the great depression, losses had typically been recovered over a three to six year period.
"The recovery is never a straight line, but as the market begins to believe that a US double dip is unlikely, we will resume that recovery phase like in other cycles, and there is plenty of upside left," Taylor said.
John McDuling - Financial Standard
No comments:
Post a Comment