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Has Property in Australia Escaped the International Crisis - 5 May 2011

While many people are talking about the bubble bursting and the sky soon falling on the Australian market, property prices in Australia have risen and more Australian housing experts are calling for the sceptics to finally admit they’re wrong. Yet, with reputations on the line, many sceptics are still holding fast to the belief that sometime soon the housing crisis will eventually make it across the ocean and hit Australia hard. For them, Australians should sell immediately if they know what’s good for them. However, months and months go by and it looks like Australian property value may not be a bubble after all and the sceptics might as well be saying that the sky is falling.

Even if for some reason house value did drop by the 20 percent that the sceptics are predicting, then renters would probably see that owning a home is now a lot more affordable compared to the rental market and property demand should spike, causing property value to rise again.

Also if house value were to drop then a homeowner who recently purchased a house and land package for $400,000, costing $220,000 to purchase the land and $180,000 to build, will now own a property worth $320,000. Neither the State government nor privately owned developers are going to drop land prices so the land will be worth the same.

Yet sceptics abound at every step. In luxury beach towns, like Noosa Heads, Australian property has dropped by a fifth since 2008 and sceptics are prophesising that this as the beginning of the end. They also quote The Economist newspaper that “Australia’s housing is the most overvalued in the world”. Yet with the house price index of Australia’s eight capital cities being fifteen percent since the first quarter of 2008, with 16 percent in Sydney and 26 in Melbourne, it’s hard to argue against success. While sceptics fear the bubble bursting, many Australians just see those reports as fear mongering and cite the increase in property value in each coming year. For them, so far the results are looking pretty good.

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