EOFY Housing Market Summary 2018
You’ll hear from mainstream media and popular press that the house market is Australia is in decline. This is not entirely true. Also, we urge you to look at the housing market from a long term perspective.
Fear is a major driver for how people interact with any form of market, be it housing or stocks. News often perpetuates how the public view these markets, as an article can either be a driver of fear (bad news) or prosperity (good news).
Housing markets in Australia, most notably in Melbourne and Sydney, have seen explosive growth over the past 50 years. Here are some examples of their long term growth.
Firstly, a report from BIS Oxford Economics states that in less than a decade, the median house price in Melbourne has gone from $460,800 to $913,162 – a rise of 98.5% – and in Sydney from $560,933 to $1,200,000 – a rise of 113.3%.
Secondly – and from a much larger perspective look at the market – a study conducted by the Banks of International Settlements has shown that Australia’s housing prices have risen 6,556% per year over a 55 year period (373% adjusting for inflation).
DON’T PANIC!
Based on historical information, does it look like housing markets in Australia are heading for a crash? Our opinion is no.
Markets naturally have pull-backs or corrections, behaviour which is seen as healthy. This is due to prices returning to the median. If prices keep going up and up with no indications of a correction in sight, this would be indicative of a pricing bubble.
Between now and 2020, the BIS study said that the Sydney market will dip by around 2%, which is a loss of $22,400 but coming on the back of massive price growth. The study goes onto say that by 2021, prices will have recovered and then some.
According to Chris Kohler’s article Domain this week, economists are predicting Sydney and Melbourne will be the lease affected cities in Australia by any weakening of the property market.
These losses are negligible over time as the long term trend is one that is heading up.
The Rerserve Bank of Australia recognizes that “We’ve got very high levels of debt, very high asset prices… and that’s our number one domestic risk.” in Australia. As such, they are unlikely to want to increase interest rates much at the moment and especially whilst the market is calming at the moment.
To summarise, we urge you to take media reports of a declining market as a good thing short term to avoid a “bust”. In the long term, Australia’s housing market is one of the strongest in the world, having perfomed well over time. One point of an investment is that they play out over large time periods. Short term pull-backs are completely normal and healthy behaviour for a functional market.
If you already own property, don’t panic and it should have been a good investment if you bought well. If you are wanting to enter the property market, be confident and get expert independent advice on your side.
To quote a phrase from The Hitchhikers Guide To The Galaxy, “DON’T PANIC”! Buyer Solutions would add don’t panic and do your research.
Not all property is good property. You need to buy under-supplied assets in strategic locations to achieve the best results. Of course, this is where a good REBAA accredited Buyers Agent can help.
Buyers Advocate, Housing Market, Investment, Real Estate News & Opinion
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