"Australia's housing market recorded resilient performance in 2008/09 and this suggests to Evans there was no pre-existing bubble in the market, as this period saw high interest rates, a tightening in credit, job losses, negative sentiment and actual price falls yet the market held reasonably well.
What also dispels the bubble notion, in the view of Evans, is there is little evidence of excessive speculative activity in the market. A disruption to the market from investors selling property appears unlikely as Evans notes property continues to outperform other assets and offers a stable, secure income stream.
Another plus for the market, according to Evans, is most recent first home buyers, those who have entered the market since 2008, have already built up a sizable equity buffer of around 18.8% from house price gains alone. While these buffers are lowest in Queensland and Western Australia, Evans points out these states have the most positive outlook for incomes and job security thanks to their exposure to resources.
Interest rates appear likely to rise through 2011, credit should continue to be constrained and affordability will be below long run averages, according to Evans. As a result he expects Australian house prices will remain broadly steady over the next two years, while over the same period he anticipates household incomes rising by around 7%.
This will improve affordability in the Australian housing market, so setting the basis for higher housing prices in the medium-term. What supports this view is authorities are well placed to cope with any economic shocks, as interest rates can be cut and fiscal stimulus applied."
