[Podcast] 11 Reasons why our Property Markets won’t Crash | Pete Wargent

 Who’s right about the property markets? The pessimists or the optimists?

In today’s Podcast you’ll find out. My Podcast 78 11 Reasons Why Our Property Markets Wont Crash

Following a couple of booming years where property values in Melbourne and Sydney experienced double-digit capital growth year on year, our markets have moved to the next stage of the property cycle where price growth has slowed in some cities and property values have fallen – particularly in Sydney and Melbourne.

Not surprisingly this is allowing some of the property pessimists on the internet forums to rub their hands in glee saying, “I told you so.”

Sure, our property markets are experiencing a slowdown, but values are still rising in many locations, and yes prices are falling a little in some locations, however, we’re not in for a property crash and in today’s show I’m going to chat with Pete Wargent to explain why we’re not worried about a property market meltdown.

Why our property markets won’t crash

One of the most frequent questions I’m asked at present is “how long will this property market downturn last?”

Another one is – “Will our property markets crash?” property market

So if you are considering investing in property, or about to buy a home, it would be good to know the answer to these questions.

But firstly, remember there is not one property market around Australia.

Our markets are fragmented – not only is each state at its own stage of its property cycle, but within each state different segments of the markets are behaving differently.

If there isn’t one market, it means it doesn’t really make much sense to say the “Australian property market” will crash, to look at this topic in a bit more detail I’ve got Pete Wargent on the line.

What could cause a crash as opposed to an orderly drop in prices

We’re experiencing a soft landing. On the other hand, a true collapse in house prices would require some large external shock such as:

  1. Unemployment high enough to trigger a wave of forced home sales.
  2. High-interest rates that would cause a raft of homeowners to default on their mortgages.
  3. Severe credit squeeze
  4. A severe recession that would cripple our economy.
  5. A significant oversupply of property.
  6. A halt to the rising population.
  7. Changes to government legislation making property investment less favourable.

The fundamentals underpinning our markets

  • World economy behaving itself 
  • Australian economy growing at around 3% Sydney Market Down
  • No likelihood of an interest rate rise any time soon
  • Our financial system/banks are in good shape
  • Employment growth
  • Strong population growth at a time when new constructions are slowing down
  • Have not had a “crash” since the late 1890’s – we have corrections on a regular basis
  • Underpinned by the high percentage of homeowners
  • More families at household formation age (esp immigrants
  • Oversupply of property limited to certain locations only – lots of secondary property and a shortage of A-grade property
  • No real concern about the level of household debt – on the whole, it’s in the hands of those that can afford it
  • No real concern about Interest only loans converting to P&I
  • A culture of home ownership – 70% of us own or are paying off our homes

The bottom line:

For a number of years now bubblers and doomsayers have been predicting the bursting of Australia’s property bubble.

They’ve told us we’re in denial about the impending gloom blinded by the consistent performance of our property markets over the last few years. property-bubble-market-burst-house-price-correction-future

We’ve just explained what could cause a property market collapse, but we’ve also explained why we don’t think we should be worried.

However, we need to be vigilant.

As investors, we need to be aware of what’s happening in the world’s economies as Australia does not operate in isolation.

And needs to keep cognizant of what’s happening in our property markets

Remember there is not one property market and some locations including Brisbane are going to outperform.

BIS Oxford predicts an 11% increase in Brisbane property values by 2021.

Strategic investors will take advantage of the opportunities our property markets will offer over the next couple of years maximising their upsides while protecting their downsides.

Michael Yardney

Metropole Property Strategists

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Pete Wargent

Some of our favourite quotes from the show: 17034015_l

“One of the things that’s been pushing up our property markets has been the rising population that’s been underpinning it, particularly in Melbourne and Sydney.” –Michael Yardney

“This is just part of the property cycle. Don’t change your long-term strategy of wealth creation because of a short-term blip in the market.” –Michael Yardney

“If you’ve got the cash flow, you’re going to get through.” –Michael Yardney

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'[Podcast] 11 Reasons why our Property Markets won’t Crash | Pete Wargent' have 2 comments

  1. Avatar for Property Update

    November 23, 2018 MICHAEL

    The Bureau of Statistics has predicted a large increase in population in years to come. Anyone who can cast their mind back to 2007 may remember the severe drought afflicting Sydney. Also much of NSW has recently been drought affected, so we need lots more water to support more people living in the regions. Sydney has a salt-water plant but I don’t know how much expensive electricity this will consume.

    Reply

    • Avatar for Property Update

      November 23, 2018 Michael Yardney

      Michael there is no doubt our growing cities will bring on social and infrastructure problems. Do you think our politicians are capable of dealing with them?

      Reply


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