Comments By : Christine Williams
Email : firstname.lastname@example.org
Phone : 1300 736 754
Do you believe this is a bubble or not ?
No I don’t. The reason why I don’t believe this is a bubble, is because it’s no different to any normal residential property cycle over the past 100yrs. There will always be boom and bust.
A “bubble” refers to the potential of property never going up in price again, but it will.
We’ve been through the GFC and 9/11, each time with a prediction of a bubble due to the economic impacts, but it hasn’t happened.
And the reason why we won’t have subprime like the US or bust like Ireland is because of our mainstream 4 top banks, which are governed by APRA (top 4 are going through capital raising to meet new APRA regulations, which will strengthen them even further).
I believe the banks won’t go under and property owners won’t go under.
There is only a problem for prop owners if they overexpose themselves in the first place ie over buying on their cars, rushing out and filling their homes with new furniture on credit from Harvey Norman, having numerous flat screens etc – when they’ve overextended, their cashflow hurts.
They may find themselves in crisis and need to sell their homes because of the situation they’ve put themselves in.
Credit policy in general is pulling the reins in.
Is there a boom?
Sydney and Melbourne are definitely going through a boom. It’s definitely a sellers’ market, but there are opportunities if you know where to look for them.
It’s all about knowing your numbers in the first place and covering them. I also expect interest rates will go up over the next couple of years, so that will need to be factored into people’s cashflows.
Buyers also need calculate in life changes (ie starting family, losing a job) and if they borrow with those factors in mind, everyone should be fine and stable.
Is this the best time to be buying your first home?
It really depends on what that first home is. If it’s your first investment, yes I would buy and then hold.
If it’s your first home, it’s a good time as interest rates at all time low.
If you can justify your figures by paying what a property is worth in a boom market, you need to understand the market will come down again. If you don’t have to sell within next two or three years, you’ll be fine.
I would advise people to buy with a view to holding for 10 years and they’ll get their money back and more. If they have the money for a deposit and the bank is willing to lend to them, they’ll be fine.
Understand they’ll have to hold a lot longer because they’re holding in the boom. Otherwise, an alternative is to become a ‘rentvestor’ – someone who buys in an area where they don’t want to live in, then rent in their ideal locality. The equity they build up through their investment will help them buy their own home in the future.