An Australian property crash coming! Well, that’s according to the newspapers and certain sensationalised TV programs with their property “experts”. Virtually every week new supposed “evidence” is uncovered about the inevitable fire and brimstone that the four horsemen of the property market apocalypse will bring when the so called market bubble bursts. Most of us understand that these scary headlines are designed to purely grab your attention and sell newspapers, but all jokes aside do these predictions have any real merit, and should home owners and investors be worried about their properties? Sadly, no one has a crystal ball for the answers, all we have to look to are the facts.
Whether or not there is a pending property bubble will be the shuttle-cock that the media and property analysts smack back and forth for the foreseeable future. As home owners and investors we are subject to this conversation, often whether we like it or not. In order to form your own educated opinion it’s important to qualify a few things.
Firstly, there is no one property market in this country, but rather a multitude of independent markets driven by different elements to create their own specific supply and demand scenarios. To say the entire Australian property market may or may not crash is misleading, just as it would be to say all Australian property will increase in value.
This is best explained by looking at your local area. Even within smaller markets we can see specific suburbs that do well, while others not so well. Usually this can be explained by a suburb being more attractive due to infrastructure such as public transport, walking distance to cafes and restaurants, close proximity hospitals and other medical facilities, as well as beaches and other desirable amenities which drive the price growth.
Stepping back and looking at our country from a higher level we see the exact same scenario, with just the variables changing. We can look to employment in larger cities, education, as well as the overall living standards as larger drivers for price growth. And once you narrow down further into those smaller markets mentioned previously, you start to understand the array of factors at play.
Secondly, it’s very important to understand that a correction in house prices after a surge is not a crash. In fact, it’s a normal and expected part of the property cycle. Few markets around the country (there are some, but not many), have sustained growth year in, year out. Most others, such as Sydney for example, lay dormant or stagnant for several years before kicking off a period of growth which we have just seen in the past couple of years.
In my humble opinion, the Sydney market generally (and remember, there are many markets within the Sydney market, so yes this is a generalisation) has more or less peaked, so the next stage would be correction, or pull back, in property prices.
The question then becomes “How much of a pull back?!”.
Again, no one has a crystal ball, and it will depend on your specific property. As discussed in previous editorials we are seeing a larger and larger split in the behaviour between apartments and every other type of property.
It is obvious to most that some major capital cities seem to be heading for an over saturation when it comes to the unit market. Inflated unit prices and massive developments both in the construction phase and in the development pipeline in Sydney and Melbourne will do nothing but push this already worrisome scenario further out of safety.
With this in mind, it’s possible to envision units having a much larger correction than house and land properties, which remain in many areas in large demand and short supply.
Large regional centres such as Port Macquarie are a great example of this, where vacancy rates constantly sit around the 1% mark, with stock becoming more and more difficult to come by, safely and consistently driving property prices upwards.
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