Why Australia does not have a property bubble
You may have heard about the discussion whether Australia’s property market will collapse in the near future or continue to grow. People love to read bad news.It sells papers and gets people watching TV. Many doomsayers like to cash in and get their 5 minutes of fame by coming up with a worse possible outcome for the property market then the next doomsayer.
Look at the case of Steve Keen. This guy is a gold class screw up claiming that in 2009 Australia’s property market would collapse. He bet Rory Robertson from Macquarie Bank that this would happen and the loser had to walk from Canberra to Mt Kosciuszko (224km). The market skyrocketed and Keen was made to eat his words and walk.
Australia does not have a property bubble. Prices in some areas are very high, there is no doubt about that and cycles do come and go but the median house price in Australia never crashes. Check your historical graphs. Even through the GFC,the median only lost a few percent. Where people go wrong is when then don’t follow the basics of property investing. They go and buy in regional towns trying to make a quick buck where they are more susceptible to market cycles. Or, they buy high-end property that has a very much reduced market if the economy makes a downturn.
Property investors in Australia have a lot going for them. We have a strong demand for housing due to a strong population growth. The housing market is under supplied in a lot of areas. To top that off we have a very stable political environment and banking sector. I personally don’t think Australia has any sort of property bubble and by no means are we in for a crash. I do think though that investors need to be careful as to where they are buying. But if you are careful and do your research I think you can reduce most risks.