Transcript LEIGH SALES, PRESENTER: Is Australia's housing price bubble about to burst?
This year's seen a fall in Australian home values and anticipated interest rate rises are adding to market jitters.
It could be good news if you've been priced out of buying your own home but it's bad news if you already own one and are hoping to protect the value of what, for most of us, is our biggest asset.
Greg Hoy reports that anxiety in the housing market is being exacerbated by allegations of dodgy auction data.
GREG HOY, REPORTER: Blurring the dream of Australian home ownership.
What do you think of the view that there's a bubble building in house prices and that it could soon burst?
ANGUS CURRY, FIRST HOME BIDDER: Look, hard to say. From the amount of properties that are passed in, it's obviously, something's happening.
GERARD MINACK, ECONOMIST, MORGAN STANLEY: As a rough ball park, I sort of think house prices are probably 25 to 35 per cent above a long term sustainable value. So, yes, to me that's bubble territory.
(Auctioneer rings bell)
TIM LAWLESS, RESEARCH DIRECTOR, RP DATA: A housing bubble really does imply that Australian housing markets are set for quite a rapid crash in home values. The evidence to date is absolutely the opposite.
LOUIS CHRISTOPHER, MANAGING DIRECTOR, SQM RESEARCH: Our mortgage debt is at the highest it's ever been and is actually at near the same levels that Ireland has actually been recording. And of course, we know that Ireland had quite a housing market crash so given the level of debt that's in the market right now, the Australian housing market is quite vulnerable.
AUCTIONEER: Start me where you like. It's where we finish that's important.
GREG HOY: Bidding on Saturday for their first home with help of a buyer's advocate, Angus Curry and his fianc?e found the competition fierce.
AUCTIONEER: First call at $430,000... and five now - 440? Four 40 now straight back. Strong bid, sir...
ANGUS CURRY: Oh look, it's a lovely house.
GREG HOY: Feeling confident?
ANGUS CURRY: We've got a chance but we're not quite sure how it's going to go.
GREG HOY: But across town, in leafy surrounds, and a higher price bracket, there was no competition.
AUCTIONEER 2: Two million dollars. Can I see a fair, reasonable start into it at all?
LEIGH MCCONNON, BUYER'S ADVOCATE: We're seeing a lot of vendors in that higher end of the range sort of having to lower their expectations to obtain a sale.
GREG HOY: International research including by the IMF and the Economist has recently suggested Australian house prices are overvalued. And there are local analysts who agree that an increasing glut of homes for sale reinforces this belief.
GERARD MINACK: As the capital city prices have come together - partly because Sydney has gone nowhere in real terms for a decade - their all looking roughly the same level of expensiveness. So the long and short of it is, it's a national problem.
LOUIS CHRISTOPHER: There are 367,000 properties on the market right now and that's actually up by 69 per cent compared to the same levels recorded this time last year.
House prices are declining and are likely to decline further from this point.
GREG HOY: But there's a strong difference of opinion.
TIM LAWLESS: I think this is the best outcome that anyone could have hoped for - an absolutely controlled exit from a very strong growth phase.
GREG HOY: Australia's most prominent and commonly used home value analysis is compiled by the recently separated companies RP Data and Rismark.
In the last quarter, the index suggests capital city home values on average fell 2.1 per cent seasonally adjusted, the worst slump in 12 years.
But RP Data remains optimistic the nation's homes can hold their current value.
TIM LAWLESS: We're seeing unemployment below capacity. We're seeing population growth still above average. Looking at those fundamental drivers and attractors in the market place, it doesn't paint a grim a picture as many are pointing out.
LOUIS CHRISTOPHER: I have to disagree with that argument. I think the market is more influenced by the cost of debt. Sadly, when you look at some of these companies, you've got an issue over a potential conflict of interest.
GREG HOY: The allegation is that housing research companies like RP Data tend to project positive home value forecasts because many of those who buy their research are involved in real estate - as is RP Data's research partner, Rismark.
The real estate industry, it's argued, tends to under report failed auctions. But RP Data stands by its research, which it says is audited, and it counters like the research house SQM are simply trying to draw attention to themselves and that it's their methodology that is questionable.
LOUIS CHRISTOPHER: We're looking at the evidence and we don't see any recovery really occurring until we probably see say a cut in interest rates or some type of government intervention such as the first home owners grant.
TIM LAWLESS: I completely disagree with that. I believe SQM are reporting about a 67 per cent increase in listings in the market. Our own figures are showing a much more subdued rate of listings growth.
GREG HOY: So caught in the crossfire over reliability of housing forecasts are sellers and buyers.
LEIGH MCCONNAN: Where we might have gone to an auction last year and seen four or five bidders at auction, which has really pushed up the price, we're now seeing that there might be one or two.
The market is more stable today but I certainly don't see a bubble that's about to bust any time soon.
AUCTIONEER: Better make it now, ladies and gentlemen. First time...
GREG HOY: There's also vigorous debate over why some states are faring worse than others - like the Brisbane and Perth regions, where the housing glut is greater.
LOUIS CHRISTOPHER: We are most bearish on the south east Queensland market. There's actually a decrease in the movement of people moving from the southern States to south east Queensland.
West Australia is a very interesting market right now. I mean, one would think the housing market would be well supported by the commodities boom. We believe that that market is actually supersensitive to interest rate rises.
TIM LAWLESS: There are some solid reasons why those cities are such weak performers and part of it is due to the fact that they have been exceptionally strong performers in the years leading up to 2009, 2010. We probably will start to see those two cities - or those two states, actually - turning around sooner rather than later.
AUCTIONEER: Four 99 and a half - the bid's here now. First, second, third and final call!
GREG HOY: Back at the auction. This was not to be first home bidder Angus Currie's lucky day.
AUCTIONEER: Sold!
(Winner squeals)
GREG HOY: You came close there.
ANGUS CURRY: We did, we did. So it was a little bit disappointing that they just went a little but over the threshold that we were prepared to buy.
AUCTIONEER 2: I can't sell it to you if you won't bid...
GREG HOY: While the $2 million home didn't draw one bid.
TIM LAWLESS: It is those premium markets that seem to be leading the largest falls in home values. So certainly demonstrating the volatility, showing a lot stronger growth in the good times and falling a little bit more in the bad times.
