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
