Ever Wondered If The Market Might Crash?
The fourth blog in our series on property investing fears is that the market might crash.
Sure, it’s happened in other places around the world, so why not here too? Plus, you hear about it in Today Tonight and A Current Affair all the time.
“The property bubble is going to burst.”
“The real estate market is on the verge of collapsing.”
I am pleased to inform you that it is all purely hype. The Australian property markets are not going to crash/collapse/burst. The reason these lines are repeated so much in the media is because it is the classic sensationalist garbage that draws viewers in so that they can be “in the know”. If you want to really be in the know about property prices in Australia, keep reading…
Let’s bust a few myths here. Firstly, the property bubble doesn’t exist. Nor is there a single Australian property market. There are, in fact, many property markets, defined by liveable areas centred around a trade centre where the population can reasonably commute from.
Yes, prices do go up and down. That’s normal, not a bubble bursting. When a property market is oversupplied, the price will correct and stabilise, but then it will continue to go up again as demand increases following this correction.
Why Australian Property is Stable
If Australia had a property bubble, it would have burst during the global financial crisis, but it didn’t. In fact, after the GFC, the Australian economy became one of the top two economies in the world, along with Sweden. People from all over the world started investing their money in Australia and into Australian real estate.
The reason that Australia hasn’t had the problems America experienced during the GFC is because we don’t lend money to people unless they can afford to pay it back. We have some of the strictest lending criteria in the world, and we are very ruthless with enforcing it.
But It’s Overpriced, Right?
Doesn’t the media keep telling us how crazily overpriced Australian property is? Property prices are driven by supply and demand. When demand outstrips supply, it drives prices up. If people can afford it, they’ll buy it. And, as I speak about in my other blogs and videos, we have the same amount of available land and a growing population, and this isn’t a trend that is about to suddenly stop!
So, the market’s not going to crash. Prices will correct from time to time and come down 5-10%, then go quiet for a while, then boom again later. It’s all natural and normal, and to be expected.
Investors should not be afraid of property prices dropping or correcting, as they are in it for the long-haul, and will hold their property through many of these cycles.
Daimien Patterson is the CEO of Integrity Investment Properties, a property investment company based in Australia. He regularly produces books, blogs, and videos on the topic of property investing. Head to [integrityinvestmentproperties.com.au] for your free copy of Daimien’s book, Safe as Houses.