Expensive housing and high household debt leave Australian housing vulnerable. But without a recession or much higher interest rates a property crash is unlikely.
However, the surging supply of apartments and the continuing strength of the Sydney and Melbourne property markets pose an increasing risk. Average dwelling prices in these cities are likely to see another cyclical 5-10% price downswing around 2018, with unit prices in oversupplied areas likely to decline 15-20%.
The combination of high house prices, huge gains in Sydney and Melbourne, low rental yields and a coming surge in the supply of apartments mean property investors need to be careful. Best to focus on undersupplied, less loved parts of the property market.
Historically election campaigns result in a period of uncertainty which have seen weak gains on average for the Australian share market followed by a bounce once the election is out of the way.
The starker choice at this election between smaller government, lower taxes and mild economic reform under the Coalition, and larger government, higher taxes and more intervention in the economy under Labor suggest greater uncertainty this time around.
To maintain decent growth in living standards Australia needs to see a return to a productivity enhancing reform agenda. It’s unclear this election will deliver that.