The founder of McGrath Estate Agents has said that despite the Sydney housing market being “overvalued” compared to other areas, it has “no chance of a 40 per cent correction”.
Mortgage Business ran a story on Wednesday (30 August) that quoted McGrath's executive chairman, John McGrath, from a panel session held at the Aussie Think conference in the Gold Coast on Monday (28 August).
In Monday's session, Mr McGrath emphasised that there are “two housing markets” in Australia, and that he believed that the one that incorporated the two major cities of Sydney and Melbourne was at the end of its cycle.
He said: “There are two markets in Australia, the Sydney/Melbourne market being one and the rest of Australia, and that could be broken into regionals and other capitals. If you look at the last 10 years, we have seen Sydney/Melbourne [prices] have doubled and we’ve seen most of the other capital cities increase by 10–20 per cent, so it really is a big separation of the two markets."
Addressing the Sydney/Melbourne market first, the founder of the real estate agency said that he believed the two cities were “at least 95 per cent through their current cycle”, adding that “it could be 100 per cent in Sydney”.
He continued: “I don’t see any material capital growth in the next few years and, equally confidently, I don’t see any material drop either."
While speaking at the Aussie conference, Mr McGrath also said that the Sydney market was “overvalued” — saying that it could be 40 per cent overvalued.
However, Mr McGrath has since reiterated comments made in the original Mortgage Business story that while “Sydney is overvalued" compared to other areas of Australia, if there were to be correction on the cards, it would only be of a couple per cent.
As was originally quoted, he emphasised that there could a “small correction”.
Mr McGrath said in a statement following the Mortgage Business story on Wednesday: “The Sydney market is most of the way through its sales cycle and very near the top of its cycle. My view is there is no bubble, and no chance of a 40 per cent correction.
“The market continues to have strong drivers, including deep demand, populations growth, overseas investment and low interest rates. There is a possibility of a small and short correction of a few per cent, and I believe that is healthy for the sustainability of the market.
“Yes, Sydney is overvalued compared to other areas of Australia. However, it is a world-class international city and a major financial centre."
Mr McGrath also reiterated his belief that South East Queensland is "undervalued and shows great growth potential”.