Hyper-localisation key to avoid property bubble: Douglas Driscoll
Chief executive of real estate group Starr Partners, Douglas Driscoll, has predicted a property bubble in Sydney to form if the market keeps on the same growth trajectory in hand with an imbalance of the housing affordability to wage ratio.
He said at the moment, the average house price is nearly 12 times the average salary in Sydney, which is considered by some respected commentators as the early fizzing of a bubble and added it is now undeniable that we are in unchartered territory and without some intelligent intervention, he believes there could be trouble ahead.
“Based on demand, I’m hearing that agents are short on listings by 10-20 percent right across Sydney and this could be partly hinging on July 2.
"Elections directly impact consumer sentiment, with the uncertainty usually making people nervous. Historically we have almost always seen a pre-election lull, but at the moment auction clearance rates are hovering around 80 percent and property prices are still ascending across many Sydney suburbs. For me, it is almost inconceivable that a looming closely-fought election and the recently introduced macroprudential measures haven’t appeared to have put the brakes on the market.”
“Property is front and centre of the current political debate, with a strong emphasis on a proposed change in negative gearing concessions. Without thorough morphological research, it is very difficult to predict the full extent of any change in policy, but it is very likely that there would be wide-felt ramifications. Negative gearing has dominated conversation for months – and has taken the limelight away from an even bigger issue: housing affordability.
"According to CoreLogic data, Sydney house prices went up three per cent in May and based on how the market is travelling and I anticipate prices will go up by at least six percent by the end of the year. A bubble is something that has never been seen in Sydney and is understandably a subject that a lot of my peers shy away from discussing, or if they do, simply dismiss out of hand. Economists might be predicting that house prices will fall by 10 percent in 2019 but for me, it’s too far ahead to call. A lot can change in three weeks, let alone three years into the future.”
He said amalgamated councils could help keep the bubble at bay, adding hyper-localisation could feature heavily as part of the solution.
“I acknowledge that it is an incredibly complex issue and I certainly don’t envy politicians – it’s a real juggling act. The Government is letting things take their natural course, which can be potentially dangerous. Now, I’m not necessarily calling for widespread changes because one size doesn’t fit all. This is primarily a Sydney issue, so tinkering with policy on a national level could create an unwanted butterfly effect elsewhere in Australia," he said.
“One way to address this matter could be to give Sydney’s new ‘super councils’ more power and the freedom to operate with more autonomy after amalgamating. They can’t be toothless tigers. We need to think of more creative ways to problem solve and this could start by looking at trialling localised or hyperlocal policies in certain areas. My only caveat would be that they are still ultimately under the auspices of the State Government for guidance and supervision.”
"This may not seem as far-fetched as it sounds; similar systems currently exist elsewhere. In the UK suburb of St Ives for example, one in four properties were believed to be used as holiday homes, being vacant most of the time. To combat this, legislation was introduced where new-build properties are only available to full-time residents in a bid to preserve community. Off the back of this, Douglas believes Australia should look to countries with similar systems for inspiration about what might work on our soil.
“Both policy makers and real estate professionals alike cannot afford to take an ignorant approach because we will lose a lot of credibility if we don’t address, acknowledge and pass comment on these complex issues – the negatives as well as the positives. Today’s consumer is educated and informed, and they look to us for candid advice. It’s our duty to be transparent, even in times when we are faced with situations that make us feel uncomfortable. We must take a responsible solution-orientated approach to the facts as we find them."
