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Has the NSW Property Bubble Finally Burst?

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There’s been a storm brewing in the Australian property market for the best part of a decade. A surge in demand for housing made property value skyrocket in almost every corner of our sunburnt country. Whilst this surge in value was a boon for investors and those who already owned property, it essentially placed even a modest home out of reach for an average Australian. As the old saying goes though, ‘what must go up, must come down” and as of late 2018 property prices began to fall. Now might be a good time to enter the game, check out Newcastle Permanent Home Loans for an alternative to the big 4 lenders.

Supply and demand

Many complex factors contributed to the sharp increase in value. Government restrictions on new land being released for development coupled with strict planning laws, cut supply of new housing considerably. As population increases so too does the need for more places to live. As a slow trickle of new homes become available people clamour for existing property driving up land value even further. 

Buying power

A key contributor to this so called “bubble” was the practices of certain parts of the financial services industry. Irresponsible lending standards and a multitude of cases of misconduct where exposed by a royal commission in 2017 but by this stage the damage had already been done. Low interest rates coupled with less than honest loans gave people more buying power. 

Don’t be so negative

The Reserve Bank of Australia (RBA) has admitted that in some areas of Australia’s tax laws are more favourable for investors than “savers”. Existing home owners also benefit more than those looking to buy their first home. Negative gearing is a form of leverage in which an investor borrows money for an investment that will (for at least the short term) return less than it costs to repay the initial loan. Numerous tax breaks are given those who have “negatively geared” their investment property. Hefty reductions in capital gains tax and the ease of finding an interest only loan gave investors a chance to buy multiple properties for rent and resist high fees and tax.

Bubbling away

From the late 90’s to early 2000’s, land value rose at a disproportionate rate to wages and rent prices. By 2014 the International Monetary Fund reported Australia had the third highest house price-to-income ratio in the world. They also noted that several developed countries were experiencing ‘historically high’ house prices. After the 2017 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there is evidence that the market is now in decline… at least in our cities.

No pop

After a decade of dizzying highs, it would seem the bubble has burst then. Not so fast, say some economic experts. Many argue that the bubble will not burst but instead deflate in a controlled and slow manner, eventually levelling out in relation to wages. Recent figures suggest that the market is indeed in a slow but controlled levelling out. Some of our regional towns and cities have reported a %10 decline in the last year, with a further 10-20% expected.

So then, investors and existing home owners may just escape what some believed would be a catastrophic burst. The good news is not just for those fortunate enough to be landlords. New home buyers are now able to get into the market for less money, and for some the Australian dream is looking realistic again. If you are thinking about purchasing property visit Newcastle Permanent Building Society today for competitive rates and features, you will love.


Source: http://www.thesleuthjournal.com/has-the-nsw-property-bubble-finally-burst/


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