House Prices – Downturn Predicted

From the media’s point of view “bad news sells” and the latest is a predicted downturn in house prices. This week’s question is asking for figures on past house price declines. And also a request for the facts that support my views for the continued increase of long term prices of housing.

A graph of house prices in Australia’s capital cities will show peaks and valleys but the long-term trend is ALWAYS upward. There is a very true saying “if you are getting into or out of a market, you are better off being one year too early than one week too late.”

My clients buy and accumulate not buy and sell so the short-term dips do not concern us, as the long-term trend is always up.

An example

Let’s take Brisbane. In 1972 the average price was $15,000 and today is over $600,000.

After the Global Financial Crisis (GFC) in 2008 house prices across all capital cities dipped for a short time by 6.1%. Then between October 2010 and May 2012 prices dropped again by 7.4%.

The falls, after the GFC in these capital cities, were Melbourne 8.3%, Sydney 6.2% and Brisbane only 4.7%. Brisbane has always been a less volatile market than Melbourne and Sydney.

The period of decline was quite short. The stimulus measures, at the time, staved off sharper declines and possibly a national recession.

I always refer to Melbourne, Sydney and Brisbane because I will only invest in a city with a population of over 1 million people. The larger population insulates house prices from short-term economic events. For example, between 2010 and 2012 Darwin prices fell by 19.7%.

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RELATED READING

Growth Corridor in Brisbane for Investment Housing

Economic Outlook for Australia and the Central Highlands

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Currently, I am upbeat about the future economic strength of the Central Highlands but what about the Australian economy in general?

By the June quarter, Australia will have gone 104 quarters without a recession. There is no other economy in the world that can beat that!

I still predict Australia will have an annualised growth in GDP of 3%. Right now, global economic growth is on the way up. Local company earnings are on the improve with company operating profits rising by 6% in the March quarter. These are record highs.

More good news!

A contract has fallen over on one of my executive 5-bed homes in Brisbane only three weeks from completion. How is this good news? As it is not yet completed, I can still sell it with separate land and build contracts. This will save the new buyer about $10,000 in stamp duty and $6,500 in land and construction interest. It is a rare opportunity so my advice is if you are in a position to take advantage, be quick.

Steve Taylor

Need help to start your residential property investment portfolio the right way? Please contact our office to schedule a free, no-obligation consultation and let’s discuss your options.

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If you prefer to listen here is my radio interview on Emerald 4HI:

https://stevetaylor.com.au/wp-content/uploads/2017/07/Steve-Taylor-15th-June.mp3?_=1

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At the helm of Steve Taylor & Partners, Steve Taylor has been delivering expert advice and product knowledge to clients for over 30 years. Steve Taylor & Partners provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.

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DISCLAIMER

Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.

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