Powered by MOMENTUM MEDIA

Investors ask: Property bubble or property boom?

Tim Lawless
buying
1 minute read

Investors ask: Property bubble or property boom?

by Tim Lawless
October 09, 2013

“I’m a new investor and the debate about the so-called ‘housing bubble’ is confusing for me. Are we in a housing bubble, and if so, what does that mean for me about to enter the property market?”

The housing bubble gets debated a lot when you start to see growth rates accelerate like we are at the moment.

An important way to look at the marketplace is to look at the cycle over the past 10 years. We’re seeing growth rates on an annualised basis only around four or 4.5 per cent across the combined capital cities. In Sydney, it’s only about 2.5 per cent per year, which is lower than inflation. Broadly, capital city growth is about in line with wages growth over the decade.

So, it’s easy to suggest we’re seeing a bubble forming now that we’re in a very strong growth phase, but look at the history. You can see we’ve just come out of a very strong correction, which saw values fall by nearly eight per cent between the end of 2010 and mid-2012.

So I don’t think we’re in a bubble.

You look at some markets around Australia that you could say were in a bubble – the Gold Coast, the SunshineSunshine, NSW Sunshine, VIC Coast, or Cairns. These markets had a very strong run-up in values and were characterised by a very high proportion of investors or second home buyers. As the market went through the global financial crisis (GFC) and economic conditions showed a downturn, we saw a lot of those buyers place those properties on the market out of distress or panic selling.

The influx of stock on a marketplace at a time when there were very few buyers around these lifestyle markets resulted in some pretty serious declines in values.

I can’t see that happening broadly across our capital cities. 

Tim Lawless, head of research, RP Data

Investors ask: Property bubble or property boom?
default
nestegg logo
share the article

Subscribe to get the latest news and updates - join a community of over 80,000 property investors.

Check this box to receive podcast updates

From the web

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.