{"id":11992,"date":"2017-06-01T15:30:12","date_gmt":"2017-06-01T05:30:12","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=11992"},"modified":"2017-06-01T15:30:12","modified_gmt":"2017-06-01T05:30:12","slug":"dont-panic-the-property-bubble-isnt-about-to-burst","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/dont-panic-the-property-bubble-isnt-about-to-burst\/","title":{"rendered":"Don\u2019t panic! The property bubble isn\u2019t about to burst!"},"content":{"rendered":"

In his column for\u00a0Switzer<\/a>, John McGrath\u00a0says despite the pessimists – the property bubble\u00a0isn’t about to burst.\u00a0<\/strong>
\nHave you noticed that the speculation has started? \u00a0\"mcgrath\"<\/a>
\nThe property market is \u201cgrinding to a halt\u201d.
\nThe boom is over.
\nThe banks have lent too much.<\/strong>
\nThe bubble is going to burst.
\nThis sort of chatter happens at the end of every boom.
\nI have seen it time and time again over 30 years and the \u2018doom and gloom\u2019 predictions simply haven\u2019t eventuated.
\nThe moment we see even the slightest change in boom market conditions, the headlines begin.\u00a0<\/strong>
\nThe end is called.
\nThe umpire blows his whistle.
\nYesterday we were in a boom, today we\u2019re on a slippery slope.<\/p>\n

A gradual process<\/h4>\n

In reality, booms don\u2019t end this way.\u00a0\"ret<\/a>
\nIt\u2019s an extremely gradual process.
\nYes, we might be at the start of a slowdown in Sydney and Melbourne today.
\nOr we might not be \u2013 no one knows.
\nBut there\u2019s a few small signs that the market is slowing and that\u2019s why we\u2019re seeing these headlines and predictions of price falls.
\nThe key is not to panic.
\nI\u2019d actually encourage you to welcome a slowdown in growth.<\/strong>
\nAfter a long period of price rises \u2013 about 75% in Sydney alone, we need a period of consolidation that will put a floor under these new price levels and provide stable ground for home values to rise strongly again in the next boom.
\nOf course, no home owner likes to see prices go down.
\nBut it\u2019s important to remember that if we do see some price reductions, they\u2019ll be small and short term.
\nHistory tells us that good quality properties double in value every decade but growth is never in a straight line.
\nMore often than not, we have a few years of strong growth, a few years of little growth and round in circles we go.
\nI\u2019d advise you to ignore all suggestions of a market crash.<\/strong>
\nIt\u2019s not going to happen.
\nYes, we\u2019ve had phenomenal growth over the past five years.
\nThat doesn\u2019t mean we\u2019re due to have phenomenal declines.\u00a0\"property
\nProperty is now analysed, or should I say over-analysed, as closely as the stock market but property is not an asset class that changes overnight.
\nWe have too much population growth fuelling demand and too much of an undersupply to experience a crash.
\nOverseas commentators, in particular, do not understand this.<\/strong>
\nThey also don\u2019t appreciate how ingrained it is in our culture to pursue property ownership.
\nWe have entirely different dynamics to overseas markets that will continue to keep our property values strong well into the future.<\/p>\n

Sydney and Melbourne<\/h4>\n

Now, the question on everyone\u2019s lips is whether the Sydney and Melbourne markets are turning.
\nFirstly, no one can ever identify the exact time of a turn \u2013 it will only become clear to us several months after it has happened because once again, the property market\u00a0\"melbourne\"changes at a very slow pace.
\nAs discussed in my column last week, new CoreLogic figures tell us that the supply of established housing stock available for sale in Sydney and Melbourne is at its highest level for this time of year since 2012.
\nDoes this indicate slowing demand? Yes.
\nIs it a sign that the market is actually slowing or just a blip? We don\u2019t know yet.
\nSaturday auction clearance rates remain very high.<\/strong>
\nAbout 60% represents a normal market.
\nAbout 80% represents a boom.
\nFor the past couple of months, Sydney has been in the 70% – 75% range.
\nDoes this indicate a slight drop in demand? Yes. \u00a0\"sold
\nIs demand still strong? Absolutely.
\nAgain, when the property market slows down after a boom, it does so very, very gradually.
\nIn my opinion, I do think the Sydney and Melbourne markets are at, or near, their peak for this growth cycle.
\nWhat\u2019s going to happen next?
\nThe two most likely eventualities are as follows:<\/strong><\/p>\n

    \n
  1. The pace of growth in property prices will slow down but not stop. Property prices will keep growing but at a lesser rate per year.<\/li>\n
  2. We have a minor correction, where the market will do as it has done before and give back about half of the prior year\u2019s growth, so that would be around 5%.<\/li>\n<\/ol>\n

    Neither scenario is cause for panic.<\/p>\n

    If the boom is indeed over, then here\u2019s my advice to people in the market.<\/h4>\n