| A 'Property Bubble' Or A Correction! |
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| Written by Luke Turner |
| Sunday, 30 May 2010 13:51 |
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In the last six months with property prices Australia wide increasing by 12-15% on average, there has been speculation of a 'property bubble' with the 'Dooms Day Sayers' predicting large falls across the Australian property market. A 'Property Bubble' is when prices crash after a property boom. This can be for many reasons such as the property market over heats, and prices become unaffordable. Another reason behind a 'Property Bubble' is when property buyers take on too much bad credit, and by doing this they may have to sell their property quickly, therefore reducing their price dramatically.
In the last six months with property prices Australia wide increasing by 12-15% on average, there has been speculation of a 'property bubble' with the 'Dooms Day Sayers' predicting large falls across the Australian property market. A 'Property Bubble' is when prices crash after a property boom. This can be for many reasons such as the property market over heats, and prices become unaffordable. Another reason behind a 'Property Bubble' is when property buyers take on too much bad credit, and by doing this they may have to sell their property quickly, therefore reducing their price dramatically. Interest rates have increased, but are only returning to normal levels. The major reason for interest rates rising is due to Australia's booming economy. Australia is predicated to have its largest 'mining boom'; therefore the Australian economy will perform well for years to come. With Australia's booming economy, the RBA has lifted interest rates to stop a 'Property Bubble' being created, in fact recently the RBA's Ms Luci Ellis, noted that recent data suggested "Australia does not have a credit-fuelled speculative boom on our hands". Are property prices unaffordable? No, because prices are still being achieved in these so called unaffordable areas, like the inner city suburbs of Sydney. For those who cannot afford the desired, ideal property in the inner city suburbs, they are having to face reality and settle for outer city suburbs or smaller properties. Australians who want to own a property are needing to be creative in many areas of wealth building, such as finance strategies, increasing their cash flow through business or PAYG income, recurring passive income or lastly choose to live with friends or family for longer.. As for the Australian property boom being fuelled by bad credit, the banks have been brought back into line by the RBA, since the GFC. The bank's criteria for getting a loan has been kept in line with strict policy by the RBA, therefore only the 'A-class' customers are qualifying for loans. What is also keeping our bank's strict policy and procedures, is the fact that the bank's funding has dried up so with the smaller amounts of funding compared to pre GFC, the banks have to lend their money wisely. With a booming economy, population boom, and major housing shortage, this just strengthens reason for the Australian property market to continue in the upwards directions. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Want to find out more about Property Investment , then visit Harvesting Group Property Services site on how to choose the best Finance Strategies for your needs. |