Some self-styled experts unfortunately have a by-line to push (and often books to sell) while a few have been widely criticised by many senior corporate economists for being unbendingly attached to economic research/writings that are dated.

You may be familiar with the comments that Australia will follow the US experience – which I suggest are fundamentally incorrect – and that the current ‘housing bubble’ will burst.

They often point to the “evidence” centered on two specific sectors of the Australian Housing Market.

Evidence one

The inner city apartment market (in particular, and especially around Docklands), because of a dramatic over supply and aggressive off the plan marketing and sales over recent years which has led many people to buy apartments at inflated prices – so upon completion, their value has already diminished from the purchase price – and supply has come online at a greater rate than prospective tenants have entered the market. Many of these have been ‘foreign purchasers’ as the Foreign Investment Review Board allows them to buy new housing stock, but generally does not approve purchase of established dwellings – and these people are carrying the brunt of this financial loss now.

Evidence two

The second sector which has stagnated somewhat and has the potential for genuinely deflated prices is in the upper end of the market – housing prices in the $2 mil+ market – and the reason here is the demand pressure is not as great there as in the lower and middle price points of the market. This affects houses as well as apartments obviously – but is not really relevant to first-home buyer or smaller investor.

Why am I so sure?

The fundamentals of a good real estate purchase remain in place – find a property in a good area, with appropriate infrastructure and services/lifestyle that provide a compelling reason for people to live there. I also think that capital growth of property from an investment perspective has to be seen as a mid to long term process, and in any investment vehicle (property, managed funds, direct share acquisition, superannuation etc.) there will be cycles of good growth, moderate growth, stagnancy, and, yes, even some negative growth at times, but the reality is that over 100 years of statistical analysis, property has generally gone OK.

In all truth of course, I don’t have the magical crystal ball and cannot be certain of the future, but I do believe that getting a foot on the property ladder while you are young enough to ride out any bumps is a good idea, because, while in some pursuits, “timing is everything’, in investment cycles, timing is almost impossible to get exactly right. It is a truism, but by the time you realise that the market has bottomed out and act, you have missed half the ride to the top.

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