Is it time to buy?
If you believe one of the most successful investors on our planet, Warren Buffet, the time to invest or the time to enter the property market is when others are fearful.
Based on the headlines we are constantly bombarded with, the average person on the street could be forgiven for thinking the property market in Melbourne is crashing. Don’t believe all the media hype! News is sold on emotional headlines. The current press coverage of the housing market is misleading and irresponsible. What the market is going through is a correction, which is to be expected after five plus years of rising house prices.
The downturn in the housing market has been largely driven by the credit squeeze as a result of APRA and the Royal Commission into the banking industry. In areas such as Doncaster, prices were further inflated by foreign buyers driving prices of houses on good size blocks of land with development potential to unrealistic levels which did not stack up. Prices in our area were artificially inflated and were not sustainable. Most of our local builders and developers were staying out of the market and were not paying these over-inflated prices. It’s not surprising to see prices in Doncaster fall by more than the Melbourne average.
Prices are now coming back to where they should be. Sellers may think they are losing by selling now but they are not losing anything because the over-inflated 2017 prices were never real, nor sustainable. They were just an aberration. Besides, if you are selling and buying in the same market, what you think you may be losing when selling you will pick up when you are buying at the lower prices.
Back to the banks and the credit squeeze. Banks need to lend money to make money, this is their business. Now that the Royal Commission report is over I believe lending policies will eventually loosen as the Royal Commission becomes a distant memory. Credit creation is what drives the economy and the housing market.
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This article is featured in our Real Estate News Autumn 2019 Edition newsletter. Click here to download your copy.