Sydney and Melbourne are far from facing a property bubble despite being in serious unaffordable territory, according to one Melbourne-based specialist.
Despite the swelling ranks of experts and columnists warning of a hazardous property bubble, Bill Nikolouzakis of Nyko Property believes the market is merely moving through its cycle, albeit in the higher end.
“A bubble means it’s going to burst and I don’t think we’re in a position where there’s any kind of market that will burst. However, in saying that, we’re certainly at a point where prices in Melbourne and Sydney need to slow down,” Mr Nikolouzakis said.
“I don’t think we’re in an amazing place where prices are moving so rapidly that we’ve never seen them at this level before.
“Maybe in the short term [it will get worst] but over the medium term, I fully believe the markets will take care of themselves.”
Lack of supply
Melbourne’s vacancy rate tumbled to a near 10-year low of 1.7 per cent and Sydney at 1.9 per cent at the end of March, while auction clearance rates reached a year high of over 80 per cent in recent weeks.
Mr Nikolouzakis said the data points to an obvious lack of supply, despite the oversupply theory being floated by economists.
“The problem with both cities is that the supply levels are so low that prices continue to move as the population grows and the demographics change,” he added.
Change of lifestyle
With first time home buyers facing the brunt of the rise in housing prices, Mr Nikolouzakis conceded that it is “near on impossible” for the next generation to enter markets like Sydney and Melbourne in the current climate.
However, he also observed that the lifestyle choices of a first time buyer have changed significantly in recent years, further limiting their ability to achieve their housing dreams.
“In previous generations, the population tended to be a bit more frugal when they were buying a property, and bought in areas they could afford,” Mr Nikolouzakis said.
“Right now, we want to live in lifestyle locations and that’s not only because we’re being spoilt but also because there’s a lot more congestion on the roads, and we want to be next to high-paying jobs, next to lifestyle centres, so I think there’s a change to how we want to live our day-to-day lives and I think that’s why first time home owners are more than ever more willing to trade that space for place.
“I put myself in that boat 10 to 15 years ago where I found it really hard to save a deposit as well because I wanted all the trappings of a lifestyle that we want to live as young Australians.”
This dilemma has seen a rise in ‘rentvestors’, people who purchase an investment property in more affordable, outer city areas, while renting in areas they prefer to live in.
“To buy a house in Melbourne and Sydney, you would have to go quite a long way out of the CBD and to travel into the city every day might not be suitable or may not give the quality of life that they want,” Mr Nikolouzakis said.
“It’s completely understandable that they want to live closer to their workplace and I don’t think they’re spoilt in doing that.
“It just means that they have to change their attitude to buying that property. Maybe the first property is not the one they live in and is an investment.”
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