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After years of predominantly negative articles written about the property market in Australia a journalist Adam Creighton has written an article published in The Australian, titled “The trouble with bubbles”. (You may require a subscription to The Australian to open this article). This is one of the few articles I have seen actually challenge the accepted media line that residential property is in or fast approaching a huge oversupply.
Adam Creighton begins his article by saying the horror stories we hear are not based on facts and goes on to say “Strictly speaking there is no housing affordability crisis. If houses weren’t affordable people wouldn’t be buying them. But they are buying them, in droves. Over 50,000 home loans have been approved every month this year, above the average for the past decade.”
Rarely do I ever see a positive or at least an accurate article about the property market and I have been fed a consistent and continuing line that at some point, probably quite soon, the property market is going to collapse leaving especially new entrants to the market well under water and perhaps having their properties repossessed. Even the RBA and Treasury have been involved in this spin and they are putting the fear of God into people about what really is a supply and demand issue.
Now I agree and as I say over and over again, there is always too much of the wrong kind of property and never enough of the right kind of property. Design is the key. But property goes through cycles of slightly oversupplying and undersupplying the market and the reality is that this is just a moment in time which will self-correct as it always does and will continue to do. It doesn’t make sense for anyone building a property if there isn’t an end user for it, this is especially the case for those who develop very large projects. They are keenly aware of the consequences of building more than is required. That’s why I see on occasion developers and builders go broke. But a property is not like many other types of investment. It can’t vanish from the face of the earth and providing the property is fit for purpose, its value will always recover and reflect the cost of replacement.
Just for your interest I have compiled a list of many of the negative articles written by various commentators over the last 15 years or so. Links to these are attached so that you can see what I am talking about.
May – John Stensholt
December – Scott Pape
August – Jonathan Chancellor
April – Steve Keen
October – Steve Keen
March – Adele Ferguson
June – Jeremy Grantham
September – Philip Soos
January – Jordan Wirsz
February – SMH
January – Philip Soos
June – Philip Soos
March – Christopher Joyce SMH
August – Nyshka Chandran
May – Roger Montgomery
August – Steve Keen
All of these articles are negative and predicted a collapsing property market where everybody who entered that market could potentially lose their shirt. Clearly that hasn’t happened, at least for most people, and it’s not likely to happen moving into the future.
Our banks and regulatory authorities have checks and balances in place, some of them are way too broad and don’t deal with specific markets, but they have to use some tool to cool an over exuberant market. And I agree, markets can at times become over exuberant, but all that means is that providing the purchaser can afford to hold the property that they have bought they may have to wait a little longer to see the price growth that they were hoping to have earlier.