McGrath Chief Executive and founder, John McGrath, said a report predicting property price falls of 50% were ill-informed and demonstrated a fundamental misunderstanding of the dynamics of the Australian market.

"I think weekend buyers essentially reacted as I did. They've heard it all before," said McGrath. "It seems every year an offshore expert takes a look at our property market and decides it's headed for Armageddon."

McGrath was referring to last week's report by business analyst John Tepper and hedge fund manager John Hempton, which argued that the Australian property market was showing symptoms of 'bubble' conditions and had high rates of reckless lending. The report drew a comparison between Australia's property market and the recent hit film, 'The Big Short', which just won an Oscar for Best Adapted Screenplay.

"The fact is, you can't bring an American mindset into any analysis of the Australian property market, as these authors have done," said McGrath. "It ignores the high level of prudential oversight applied by the banks in Australia, which are amongst the best in the world, and the fact that we do not have questionable financial products such as the non-recourse loans that allowed irresponsible lending practices in America."

McGrath's comments come as The Financial Review today reports that the Australian Securities and Investment Commission is not concerned about a disastrous property correction. The regulator has investigations already underway into broker remuneration and the high rates of interest-only loans for owner-occupiers, and believes this proactive approach to banking regulation will protect Australia from a 'Big Short' type correction.

"We are talking about a market that has been undersupplied for many years," said McGrath, "And that has been one of the key drivers behind the increase in house prices.

"Now, thankfully we are beginning to see supply meet demand, and we can expect a slowing down in the rate of growth. Not a bust but a slow-down. This is something that had to happen if we want a sustainable real estate market and to see the next generation of home buyers have a chance of owning property.” 

McGrath said predictions of a doomsday-type fall in the property market had become commonplace, but in the 32 years he has been in the industry he had not seen any of them come true. 

“Real estate should always be considered a mid to long-term investment,” said McGrath. “If you follow the movements monthly you may well see extreme highs and lows but over the course of two to seven years the graph evens out and it has proven to be Australians’ most consistent and reliable path to wealth and security. With continued population growth and a low interest rate environment, I believe all the factors that support a healthy property market are well and truly in place. 

“Our numbers at McGrath Open Homes and auctions are just as high as last year, and over the past four weeks our clearance rates have averaged a very healthy 78.2%."

Read more:

Paradox at heart of the housing market