Investors move in again as the property market warms up

For the first time since before the global financial crisis back in 2008 property is firmly back on investors’ radar. Prices have moved up solidly across the residential sector, crowds are reappearing at auctions and clearance rates in Melbourne and Sydney are at record levels of 80 per cent or more.

After some lacklustre years when housing prices fell or were flat and the building industry in most cities was in the doldrums, things have turned the corner in the past few months. Across the nation house prices are up 8.3 per cent in the last year. Sydney has been the leading market with price rises of 12 per cent, Melbourne has seen rises of more than 8 per cent and Perth prices are up 7 per cent.

The response to these moves in official circles has been quick and unusually terse. Regulators, apparently moved by fears of the post-GFC housing slumps experienced in the US and Europe and an awareness that Australia has managed to dodge that bullet to date, have been warning of the emergence of a bubble in the nation’s $4 trillion residential property sector.

Lenders are being urged to act with caution lest they inadvertently trigger a boom-bust cycle, and some international fund managers are warning that overvalued property has made a bubble of Australia’s sky-high bank share prices. The country’s major banks, they point out, are valued at $500 billion, are valued at up to 60 per cent more than foreign counterparts and the biggest, Commonwealth Bank of Australia, is now worth more than the world’s largest computer chip manufacturer Intel.