The Australian Property Market – Booms And Bubbles

The mark of an astute property investor is his discernment of market trends, says Lauchlan Leishman. For instance, during times of market turbulence, when they say that it’s not a good time to buy, there are still areas that are prime for investment. If you have the money to spare and the patience to wait, you can ride out the period until you can cash in on your investment.

People also tend to get excited over booms and to panic over a presumed bubble bursting, but if they can read and understand how the market is moving, they can continue to make the right investments as well as expect returns from them.

Take your lesson from this scenario. In 2014, the Australian property market initially enjoyed great conditions with record low interest rates and a high demand from foreign buyers. It was reported that Chinese buyers alone were pouring more than $5 billion per year into the Australian property market. Such activity drove prices higher, leaving local income unable to keep up. During this time, the average house price in the major cities rose by over a third and the median house price ballooned significantly. Such a trend triggered concerns for a bubble.

As the second half of the year approached, indeed, prices began to drop. It was either a seasonal thing with the Australian fall and winter months inducing weaker market conditions, or a more telling indication of where the market was truly headed. After all, everything has a growth cycle, and when something has reached its peak, the only remaining movements would be to plateau or to fall.

The thing about bubbles is that they’re not as invisible as people expect them to be. When people exclaim that nobody saw a burst coming, they would be lying. In this day and age, with many lessons from the past, a bubble is very much discernible. You can, of course, keep on playing the market, but remember to keep your senses sharper.

Property investment is definitely not for the faint of heart. Its market may not be as volatile as that of other investment options, but you still have to stay on your toes and keep track of fluctuations and trends.

The key, of course, is in getting out before the burst. If you want to take advantage of a boom, go right ahead. Just make sure that you do not wait for the market to peak before selling. You want the highest profit you can make, but it would be imprudent to risk big losses. Remember that when markets drop, they usually do so at alarming speed, making it hard for you to exit without huge regrets.

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