What Will 2012 Hold For Property?

Written by Paul Kounnas Wednesday, 08 February 2012

Confused is the word that best describes the real estate market at the moment – at least as far as the media and many gurus are concerned. There are so many different views on where the market is heading that meaningful analysis seems impossibly hard.

Sure, the market is flat and properties have lost some value in recent months. But that just means there are more buying opportunities.

Despite the worst predictions, in the past year Melbourne dwelling values fell just 5.8% according to the latest RP Data figures. Even though prices may remain flat for a while and some properties could fall further, there’s absolutely no reason to expect a crash as the media would have you believe.

There are only four things that could make our property markets crash: Recession, High Unemployment, High Interest Rates, and Oversupply.

Recession, although a possibility is unlikely in the face of our current resources boom. Rather than high unemployment we are seeing a shortage of skilled labour necessitating an increase in immigration. High interest rates are not going to happen any time soon as we have just had a reduction and may yet see another.

Property oversupply also won’t become a factor as we have a national shortage.

HSBC’s Chief Executive Economist, Paul Bloxham, points out the dwelling price to income ratio has remained stable since 2003 at between 3.5 and 4.5. He is forecasting growth in disposable income per household of around 5% per annum over the next few years on the back of strong employment and wages growth – a pointer house prices will grow at this pace.

The fundamentals for a strong medium and long term market are sound as Australia has a strong economy, full employment, rising wages, affordable interest rates and a growing population.

“Historically property prices go up in small booms, catch their breath and sometimes even drop before moving up again.”

“In reality, potential short term problems only underscore the importance of sticking to the basic rules of property investment. Look for property at the right price, in the right location, with the right rental income.”

“This market provides opportunities below intrinsic value as a hedge against further falls.”

Comments (2)

Subscribe to this comment's feed

...
written by Anand, February 09, 2012

Well said! On the other hand, you are forgettng the underlying fact of high dollar value, loss hundreds of highly paid jobs, European crisis. You have to be cautious. Stretch your credit to the level where you can safely manage, with loss of overtime. Loss of income in a family, reduced hours of work etc. should be considered.

While Australia is going through Mining boom it is also hurting other sectors due to high dollar value. Eg: Tourism, Cattle and meat exports, Education, Services etc. Therefore the time is to be extra cautious.

Anand

• 
• +0
• 
• 

...
written by Paul, February 13, 2012

I agree, the high Australian dollar is a concern.

• 
• +0
• 
• 

Name

Email

Comment

smaller | bigger

Subscribe to thread.
(Registered users only. You will get an email every time a comment is made to this article)

Write the displayed characters

Add Comment