Treasurer Scott Morrison must be an avid follower of this blog. Why else, in a recent interview with the International Monetary Fund, would he echo sentiments we’ve long shared here? In my first act as the Coalition’s newest political advisor, I’ll reiterate some of that interview now. Morrison notes:
‘There was “no evidence” the property market was overvalued outside “arguably some pockets if x and y and z happened, and x and y and z as yet has not happened,’ he said in the interview in Washington.
I’m under no illusion that property in some locations, as Morrison notes, is overvalued. I don’t need to look far from home, I live in Sydney’s north-west, to see overvalue in action. Land prices have doubled in the last three years; house prices increased by 65 per cent over the same time frame. As much as I’d love to crack the champagne bottles, I’m not deluded enough to believe that the ‘good times’ will last (I use inverted commas because I don’t happen to think that a rise above fundamental values is a good thing).
In response to a 60 minutes segment in February that predicted a housing apocalypse, I noted the below:
For a result like that (a property crash) to occur Australia wide, we’d need an economic meltdown, drastically higher interest rates, loss of jobs and an unprecedented evaporation of demand. The probability of one or these is unlikely, let alone all in unison.
These are some of the unlikely ‘x, y and z’ events described by Morrison. He went on to say: ‘I think these risks can be overstated. They can be really overstated,’ and that the Australian property market was ‘prone to exaggeration.’
Unfortunately, that exaggeration comes in the form of ‘news’ and too often dictates our investment decision making. Don’t let it dictate yours.