Bubble Schmubble

Is There a Property Bubble?

Is There a Property Bubble?

There has been some recent talk of a property bubble by a few property commentators (and journalists).

Firstly, many of these commentators live in Sydney which has experienced strong property price growth. The word “bubble” is more likely being used to create sensationalism to sell newspapers and magazines. There most certainly is no bubble but lets look at the facts.

Sydney had come off a prolonged flat period so was playing catch up. It also has a strong economy and actually has a shortage of housing for it’s growing population. Certainly low interest rates help promote demand and therefore price growth, but this factor is the same across Australia.

What the word “bubble” is referring to in this instance, is the normal situation in an expansionary phase of the property cycle where prices rise strongly and then usually pull back slightly when the upswing is over.  Sydney has had nearly 14% median price growth over the past year and about 39% since it’s low in 2012. This is great if you own property and looks to be continuing but at a slower pace for another year or two. You should expect to see a 5% or even 10% pull back in prices when interest rates start to increase again. Hardly a bubble bursting but a necessary evil.

For example, Darwin enjoyed over 17% price growth since mid 2012 but has fallen 0.8% in the past year to March 2015. We’ve also seen Perth and Hobart fall but by less than half a percent. This is simply the nature of all markets driven by supply and demand.

The idea is not to buy in at the very end of the upturn as you might have to wait quite a few years before the next recovery begins. At Investment Property HQ we look into where a region is currently placed on the property cycle to determine if it should be considered for investment. It’s one of the many factors we research to determine which are good properties to suggest to our investors. If you’d like to benefit from our experience then contact us using the form at right or at iphq.com.au or give us a call anytime on 1800 767 332.