Like you, I've noticed a growing number of articles declaring that Australia's housing boom is 'finally over'. My memory's hazy but if I recall correctly, there have been several instances where our housing boom was declared 'over', generally corresponding with the many mini-dips in this index over the past 5 years:
I'm fairly negative on the Australian housing market because I think it's been propped up by low rates and easy lending practices among big banks like Commonwealth Bank of Australia (ASX: CBA), and especially Westpac Banking Corp (ASX: WBC), which had 50% of its loans in the interest-only format.
However, the characteristic of a boom – and there is some debate about whether we even have a property boom – are a warped psyche and strong fear of missing out (FOMO) among participants.
While we arguably have seen some of that, we certainly haven't seen much change in the psyche of participants. I would argue that many property buyers in Sydney may not even grasp the recent changes APRA has imposed on bank lending policy or the implications of stricter capital controls in China.
If there is a widespread belief that property goes up forever – an essential characteristic of a boom – it's hard to argue that this belief has changed in recent months.
If anything, I'd say that the number of property spruikers and amount of bank advertising for loans has increased significantly. This could reflect difficulty in attracting buyers, which in time may result in lower sale prices if people struggle to sell – especially as banks are forced to roll over customers into principle + interest (P&I) loans.
Lower sale prices in time could end the boom, creating a rush to lock in gains/minimise losses on property that is falling in value, triggering a race to the bottom.
However, while there may be the ingredients in place to trigger an end to the boom, until we see a change in the collective obsession with property I'm not ready to call an end to the boom just yet.
Not seeing an end to the boom, however, doesn't mean that bank shares or mortgage brokers are a buy. With tightening lending conditions it seems almost a given that loan volumes will fall, resulting in less business for lenders and brokers (although interest margins on loans might improve). I'm personally avoiding the property lending sector entirely.
