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Is It Looking Bleak For The Australian Property Market?

property marketMark Mulligan has written an article for the Business Day section of the Sydney Morning Herald where he talks about the possibility of a slowdown in the Australian property market. Mulligan feels that the expected decline in our real estate by March next year may bring the economy closer to recession.

Prices are close to their peak values

Investment banks feel that prices are close to their peak values and buyers have already overstretched their budgets. Prices may cool down once supply outperforms demand. In such a case those who have not been able to access the market due to high prices will get a chance to purchase properties. However, it may be a really bad sign for “highly leveraged” buyers (those who use gearing).

Equities do not look as bad, property market as good anymore

Properties have worked well as an asset class and the government’s move to shift the economy from the mining sector to the construction sector has not been a bad one. Equities, however, no longer seems like a bad option compared to real estate. In fact, Credit Suisse suggests that properties may become a riskier asset class than equities, writes Mulligan.

A couple of ratios which can be used as indicators

The ratio between property price and household income is getting higher by the day and another ratio which defines average household debt to GDP is also getting close to dangerous levels. The Sydney and Melbourne markets are already overheated and if they face a meltdown they will cause a broad economic downturn.

You can read the original article here.

Rebound effect

Our property market has had a long bad run before hitting its stride in the last few years. I feel that what we are taking for super growth is actually a rebound effect of lying low for too long. Our prices are only looking high because they were irrationally low for quite some time. Having said this, I will be the first one to agree that properties are really overpriced in certain pockets of our real estate.

Investors need to be careful

It is in such areas in particular that investors need to tread very carefully. You do not want to buy above market value and regret poor capital growth later. It is definitely a good idea to involve professionals such as a great buyer’s agent to help you stay away from overpriced properties.

I will be more than glad to help you in your quest. Feel free to contact me today.