Are we in a property bubble?

 

Hello and welcome to Home Hound’s Property Investment corner, I’m Ben Kingsley. Today I would like to talk to you about the story that is on everyone’s lips and that is are we in a property bubble?

The reality is, we are not in a property bubble at the moment and let me explain to you why. In this particular growth phrase which started around May 2012, we are actually seeing around 20% growth occurred during that time frame. Now, that’s cyclical in most regards in terms of how are we seeing most of our cycle working when we do have an upturn in value. But what’s different about this particular cycle is we are seeing more and more activity in the inner and middle ring areas. We are also seeing more activity from those people who are upsizing or downsizing and also from the investors. Probably more investment activity than we are seeing in a long time. But the market place that we haven’t seen coming to the fray yet is the First Home Buyers in a big way.

That’s pleasing because what actually would happen if we saw the first home buyers coming into the market and they were buying out in the mortgage belt areas, the areas that are around 25 – 40 km from the major CBD areas of each cities. Well, that’s when we start to see a spontaneous buying and that’s a danger. So we’re not seeing those sort of $700,000 to $800,000 price being paid for houses: 4 bedrooms, 2 bathrooms houses out wide and that’s when I would be starting to worry about a property bubble where the first home buyers are extending themselves beyond what’s affordable to them to get into the market. They’ve been very measured. What we are actually seeing with these upsizers and downsizers is people who can quite comfortably afford to get into the market place.

So, sentiment is good, values are definitely moving forward but we are not seeing frenzy buying like we saw in the 2001 and 2003 boom period of property. Right now, we are comfortably not in a bubble, but I would certainly not like to see another  15 – 20% growth inside the next 12 months cause if we did see that, then we are certainly be pushing the values beyond what they should be at this moment in time. Just keep watching the market. If you are saving up to invest yourself or saving up to buy your first home, if values are moving quicker than you can save then you need to consider it. If they are not, keep saving and make sure you can afford not only today but certainly into the future. Thanks for watching.

 

About the Author:  Ben Kingsley is the founder & CEO of Empower Wealth – a specialist property investment advisory firm in Melbourne.  He is a Qualified Property Investment Adviser QPIA, Licensed Real Estate Agent (Buyers Agent) in VIC, NSW and QLD and licensed Finance Broker.  He is also the Chair of the Property Investment Professionals of Australia – the peak industry association for property investment specialists.

comments powered by Disqus