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The Term “Property Boom” Is A misnomer

property boomIt’s quite a feeling when you get your opinion voiced from other quarters as well. Being a person who has long been vocal against the use of term “bust” and “boom”, I feel vindicated while reading Mark Armstrong’s piece on the Property Observer. He asserts that we are not at or near a phase of property boom and the present growth is part of the natural property cycle.

Higher auction clearance rates and median pricing have clearly demonstrated that the market is on an upswing. This being said, not all growth can be equated to boom. According to Armstrong, boom and bust cannot be related to the property market because its volatility is far lesser than “liquid asset” markets.

Homes serve dual purpose

Homes are not only an investment; it is also a place where you can live. Serving dual motive, its level of demand does enough to stabilise the market most of the time.  Armstrong concedes that a bust-like situation can still exist in small towns where lack of diverse factors of growth can result in complete death of the market. The same situation can also rear its head in oversupplied areas.

Barring these two types of market, real estate moves through a series of phases; largely referred to as growth phases.

Treating property market generically can be a big mistake

Armstrong also points out that it may be a folly to treat the property market generically. All properties do not fall or do not rise during a crest or a trough like situation. Some properties may keep doing well while others stagnate or completely go off the curve.

You can read the original article here.

All that’s happening is part of the property curve

At this moment, we have just come past hard times (pretty dubious at places) and are on the upward slope of the growth curve. The capital cities have rallied really well and recorded superb figures for “growth in housing values”. Construction sector has got a shot in its arm and already builders are at ease while releasing their supply. Dwelling approvals are at their near-peak levels and low mortgage rates have triggered buyer/investor optimism.

This is consolidation phase guys!

This is the consolidation phase of the property cycle and Australia should hold on well to it because it is quite strong with its intrinsic economic values.  Now that  the repercussions of mining bust are for all to hear, less number of investors are relying on single-industry economies to choose their property locations. This will mean that “property busts”, already a kind of misnomer, will be the term to next go out of the real estate lexicon.

Do you think high dwelling approvals have got mostly to do with low mortgage rates? If not, what in your mind are the key factors contributing towards them?