We have had economists and university academics tell us property prices will fall by 40%. The media as a whole jump on this and espouse the virtues of the “expert” to a point where Nostradamus’ spin doctor would be proud.
When that proves wrong, there is no change to the media’s view point, we just wait for a year or two and then put the same experts back up with a different set of “proofs” and again champion their “expert.” Two years after the first academic to say the market is falling 40% we have more people saying the same thing.
The Valuer General figures show that Melbourne’s median house price between 2008 and 2010 moved up 12.66%p.a: the opposite direction to the experts’ opinions.
Earlier this year some of the same academics, and a few others that had a vested interest in luring people away from the Melbourne property market, began running with the “property prices to drop 40%” line again. This time with the global economic woes firmly entrenched on the front page of every paper, some people began to believe a 40% drop in property values was possible. The Valuer General tells us that the Melbourne median house price actually grew 1.8% from March 2010 to March 2011. These are real numbers! These are genuine statistics that are collected from people who pay stamp duty of property transfers. Basically it is accurate data.
Over the weekend I heard one of the TV stations running with the line, “The property market will drop 25%.” This is plausible, if you are assuming it relates to volume. I do think the turnover of properties will drop. If you think it relates to price, then there is no evidence this is actually happening. In fact if volumes keep dropping, and the better properties are more tightly held, I know which way property prices will definitely go over the long term. They will Rise and rise faster than they have in the past.
Australia is called the lucky country, and although we have dreadful fires, floods and all kinds of natural disasters, we still live in one of the best countries on the planet. And you will not get that much argument from many other people around the world. Our unemployment rate is the envy of every country on Earth. Our natural resources put Australia at the forefront of world economies over the next 20 years. Our only major problem is our lack of population. We should be striving to double our population within the next 40 years. Net migration should be allowed to increase to facilitate a reduction in skills shortages that our great nation has.
Global economic woes and another credit crunch will stifle property price growth in the very short term. But with our economy booming along relative to the rest of the world, our unemployment rate is almost a little too low, creating a skills shortage, and the outlook throughout most of Asia looking very good, I think people, in general, will feel comfortable to settle down and make a long term property purchase.
With a shortage of houses where people want to live, with the building industry slowing down in the wake of First Home Owners grants drying up from their peak in excess of $30,000 and with the population growing at a rate nearly twice that of the world averages, I cannot see how the humble Supply vs Demand economic rule will not prevail.
House prices over the next ten years will most likely increase at a rate equal to or greater than the last thirty years. Properties are not overpriced in this country. Australia is setting new benchmarks for global prosperity and people from all over the world will want to live here. And they will pay for the privilege. Expatriates are returning home from overseas to ride out the GFC. Many of whom are happy to purchase property here at very low prices comparative living in major capital cities around the world.
The media tend to report “Gloom and Doom” because it markets better than a “steady as she goes!” story. So here is a little gloom and doom for you. Over the next ten years property prices in the Melbourne will reach record highs and it will be just about impossible for first home buyers to even enter the market. For those of you who want your children to have the best possible start in life, think seriously about buying a property within the next decade for each of your children and setting them up as an investment property. Property prices will double within the next ten years across the top third of suburbs through Melbourne.
Ian James
Director JPP Buyer Advocates
