The first question to ask is; “Has this happened before”?

Of course it has.

The second question is; “Should I be worried?”

The answer is ‘No.’

Property prices in Melbourne have unquestionably soared over the past few years as it has done in the past and property prices will probably continue to fall over the next 18 months, as it has done before.

I am not sure what all the fuss is about as Melbourne property prices have a cycle that they go through. In fact this market slowdown is well overdue.

Let me prove my point.

In the mid 70’s I was selling a house and land in the region of $15,000. Yes, you are seeing right. $15,000 for a house and land in the City of Knox.

Fast forward to today. The median price in the City of Knox is around $700,000.

Do the maths. How many times has it doubled in 40 years?

The median price of a home has doubled over 5 times in around 40 years.

Morgan Stanley also believes that the housing market will continue to weaken. They have reached this conclusion by using their Australian housing model (MSAHM), which clearly shows the housing market weakening.  The basis of their findings takes into account a number of factors including the delicate balance of supply and demand, mortgage serviceability (this is affected by interest rates and employment), credit supply, house price expectations and rental market conditions.

While Morgan Stanley and CBA believe prices will continue to fall, they don’t believe the property market will crash. After several years of continuous growth, the market is typically going through a consolidation phase. Their expectation is a fall of about 10% in Sydney and a little less in Melbourne.

This correction in house prices should not come as a surprise. Prices cannot rise indefinitely without a breather. What we are experiencing is the start of the mid-cycle slowdown in the 18-year real estate cycle.

If you are thinking of selling and buying in the current market, it really doesn’t matter what the market is doing because it’s all relative. You may sell for less but you will also be buying for less.

If you are currently selling and you are not realistic about your price, you should consider taking your property off the market and hold off selling for a few years. However, my advice is that if the price you get in today’s market allows you to make the move to a better lifestyle, don’t put your life on hold for a price that the market is not willing to pay you. That price you want obviously doesn’t exist; otherwise, your property would have sold.

The Melbourne market is solid as a rock and predictable.

If you are considering selling and want to be sure of a good result, make sure that you email Bertram@propertyadvocacymelbourne.com.au and I will be happy to send you a complimentary copy of my eBook.

“How to get the best result, when selling your property”

A quick and easy read that will ensure the best result.

I read an article written by Peter Switzer, which made so much sense and I have included a small section of it here.

“I’m sorry that I have to write about property prices again but I do feel compelled to give the other side to the story that’s being pedalled by the media and some economists. Today, following the 22nd time the Reserve Bank has met and left interest rates on hold, there are references to a house price slump and the possibility that the next move on rates will be down, not up!

It’s become fare that the media loves to gobble up because they think it sells newspapers and attracts eyes to their ‘important’ stories.

And they might prove to be important stories but right now they’re nothing more than speculative stories. Two big watch issues make it possible for this fear and doom tale to be told that the house price fall might be scarier than you think and that the RBA will be forced to cut rates.”

I have said this before and I will say it again; a slowdown in property prices has a cycle that repeats. In my 45 years in property I have seen it happen four times already.

So, why all the fuss? Why are people worried about this, when it has happened so many times before and all you have to do is look at the median price of a house today and check what it was 40 years ago in Melbourne and you will see the gain quite clearly.

In 1970 it was $12,800 and in 2016 it was $773,000.

You’ll find that in each 10-year period there seems to be 3-4 years when the market is flat, 3-4 years of low capital growth, and a few years of strong price growth during the boom stage of the cycle.

When you look at the property prices that prevailed years ago, and look at property prices today, it’s clear that property investment is a long-term play. You need to be patient as, over the long term, values in our major capital cities have doubled every 7 to 10 years.

With property prices stabilising, you might think it’s a bad time to enter the property market. What stops people from buying property is fear. The fear of paying too much, the fear of making the wrong decision or the fear that the market may crash. But even if prices are falling right now, that’s no reason to be fearful. It is important to understand that when it comes to property you are not in the game of picking the top or the bottom of the market, no one can do that.

Despite the falling prices, property is a long-term investment and over time prices will rise

Cheers, Bertram