As the price of property increases, the rising cost of the asset class should not be looked at as a “bubble” but a long-term structural problem, says JP Morgan.
Speaking in Sydney yesterday, JP Morgan principal of Digital Finance Analytics, Martin North, said the situation is driven by a “fundamental economic equilibrium”.
“I don’t think it’s a bubble because it is fundamentally driven by a set of economic variables which are complex, but can be tackled if we look at it holistically,” he said.
Mr North indicated that a bubble is a short-term spike that cannot be explained by an economic situation.
Regarding the substantial increase in the cost of property, it can be explained by the imbalance in terms of supply and demand that has been evident for the last 15–20 years.
“State, federal, tax, supply, demand – it’s that complex metric that needs to be addressed.
“The problem is that we don’t have the people are prepared to look at it holistically,” Mr North said.
Mr North said both state and federal governments need to look at the structural issues within the property sector if long-term problems are to be addressed.
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