The difference between a housing boom and a bubble
Property booms occur when demand (usually from owner-occupiers) steadily nudges housing prices up until, eventually, the market levels or drops, but doesn’t crash.
Property bubbles are when prices rise by large amounts, without any rational connection to market fundamentals. Often, bubbles are driven by FOMO (fear of missing out) and speculation. At some point, people start selling, others follow, panic sets in and prices plummet.
Is the Australian property market in a boom or bubble?
Australian property values are growing at their fastest rate in 17 years, driven by ultra-low interest rates, rising consumer sentiment and government stimuli. Auction clearance rates are through the roof and new lending commitments are at record levels. At the same time, there is a lack of new listings on the market, so demand has raced ahead of supply.
But that doesn’t mean we’re in a bubble. The economy is improving, unemployment is falling and the Reserve Bank has signaled it will keep official rates on hold until 2024, so the rise in demand makes sense.
All this points to us being in the early stages of a property cycle, rather than a bubble.
Is there a “right” time to invest in property?
Property investors should always bear in mind that property is a long-term investment, not a short-term game. Historically, Australia’s property market has grown in value over the long term, despite occasional falls.
So don’t try to time the market. Rather focus your efforts on buying the right property at the right price, and then holding for the long-term.
Investors Dream can help you with this. We’ll research the market to help you find a property that matches your investment goals and budget. Book an appointment today.