Is a Property Crash Inevitable?
With so many property markets around the country experiencing a boom, many pundits are just waiting for the downswing.
For some, the belief that the bubble will inevitably burst sees them waiting for prices to drop before they make a purchase. This begs the question, are we actually any closer to a property crash?
While some experts are predicting that it could come sooner rather than later, Stockland boss Mark Steinert gave an upbeat assessment on the state of the housing market. He suggested that while differences remain among segments, the overall outlook was positive and there is no sense that the market is at or anywhere near close to full steam.
For nearly seven years now, many commentators have been predicting a housing bust and have taken a negative view on the state of the market. They believe that consumers are already at peak debt, that housing is unaffordable and that a correction is only a matter of time. However, prices haven’t collapsed over that period, instead improving markedly in many places.
Household debt-to-income ratios and house price-to-income ratios have been high and climbing higher over the past decade, and these issues haven’t been effectively dealt with. In fact, both of these measures have failed to give any useful insight into the property market.
As far as the overall economy goes, if it has truly been as weak as some suggest, then that simply makes the property gains we have seen to date all the more remarkable. They have occurred during period of prolonged economic weakness, among a rising unemployment rate and alarmingly low confidence. And now that the economy is clearly coming out of that period, why would that end?
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