Property bubble burst will reveal new hotspots
An impending price correction in one of Australia’s largest capital cities could actually be an opportunity for investors to discover new capital growth locations.
On the back of recent reports from Fitch Ratings and CBA that certain parts of Australia are in a property bubble – with Fitch’s managing director Ben McCarthy going so far as to say property prices could fall by as much as 25 per cent – Positive Real Estate CEO Sam Saggers said a price correction on the back of a bubble burst might not be “such a bad thing”.
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Speaking to The Smart Property Investment Show podcast, Mr Saggers confirmed that parts of Melbourne are due for a downturn.
“I think certain pockets of Australia absolutely are a little bit overpriced right now. There’s going to be a correction. There are areas in Melbourne that are in a bubble, let’s face it. There is a small bubble that’s about to pop and I don’t think that’s such a bad thing to be honest with you," he said.
“I think a correction in prices, particularly in Melbourne and Sydney, will bring some balance back to the market.”
Mr Saggers said the concept of a property bubble had become overinflated and talk of a 25 per cent to 50 per cent correction post-pop are probably overstated.
Instead, he predicted a correction of five to 10 per cent.
When this ultimately occurs, there will be even more opportunities for investors, according to Mr Saggers.
“I will add that Melbourne has some great areas to buy,” he told The Smart Property Investment Show. “In fact, if you actually understand the town plan of Melbourne, it’s quite easy for investors to avoid areas of oversupply.”
Mr Saggers said investors needed to look for ‘not in my backyard’ (NIMBY) areas where locals reject development, ultimately leading to an undersupply of property.
Last week, Mr Saggers spoke to Smart Property Investment about this phenomenon in more detail and said investors who get into NIMBY suburbs will do well in 2016.
“So if you buy in a suburb like that, you’re not going to have that supply issue – and in fact you could actually have the opposite happen where there’s more demand trying to get into that suburb," he said.
“And so if you can buy a piece of that suburb you’ll do very very well, despite the macro conditions of too much supply coming into the Melbourne market. So suburbs like Ivanhoe, suburbs like Armadale – you just don’t have the amount of apartments being built in those areas that you do in other precincts.”
You can listen to The Smart Property Investment Show with special guest Sam Saggers below, or you can subscribe on iTunes.
An extended interview with Mr Saggers about what's next for investors in mining towns, where investors should go next for fast gains and high cash flow, and what's in store for Sydney and Melbourne's property markets in the New Year can he heard here.
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