It wouldn’t be a regular week in the real estate circle if there wasn’t murmurings of potential disasters looming on the horizon. Word around the proverbial watercooler is that Australia’s property market is heading towards a potential crash, as record low interest rates, coupled with rising house prices warn of a potential housing bubble.
What is a housing bubble and why should I care about it?
Don’t get confused with the deceptively innocent name, housing bubbles can prove detrimental to the property landscape and occur when housing prices become unsustainable and growth slows. This metaphorical bubble can burst when property prices decline, usually as a result of a serious economic event. This can become a serious problem for investors and home owners alike who are heavily invested in the property game.
Why all the doom and gloom?
Despite all of the fears surrounding this potential bubble, experts believe that the concerns are being overhyped. Australia has been fortunate in that is has never experienced a serious housing bubble like those that transpired in the US in the wake of the global financial crisis. Instead of the nuclear option, it is agreed that a slowdown in growth or a slight price correction is the more likely outcome.
Perth provides a perfect example with the recent slowdown in property growth as the recent mining boom has dwindled and begun to lose momentum. During the height of the boom, the market saw a huge spike in money and workers needing places to live. Although that same market has now slowed, growth has slowed but it has not come to a complete standstill.
Ensure you’re prepared
If you’re looking at property as a long-term investment, it’s important to allow yourself a little bit of leeway and ensure your align yourself with a loan which won’t stretch you thin if the market does drop. There are many fixed interest loans available which will protect you financially should the market take a dive. For the time being however, the low interest rates make now an ideal time to enter the property scene.
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