Bubbles burst and vanish…

Bubbles burst and vanish…

Many media outlets have been talking up a property bubble… like many analogies it has unspoken and inaccurate inferences. Bubbles burst and vanish. Clearly we are in a period of growth and recent research by BIS Shrapnel (read here) says we can expect further price growth in 2015/16. The report also says “the rate of growth will slow” but it doesn’t say values will decline. For decades the traditional suburban housing market has been adept at adjusting to supply and demand. If demand slows, so does supply of new houses soon thereafter. This mitigates any decline in values until demand recovers. However we are in uncharted waters when in comes to the apartment market, with some very large projects dominating the supply pipeline. Committed projects take between 1 to 3 years to complete, which delays the reaction to changes in supply. However all the indications point to continued strong apartment demand for occupation and investment.

So if you are looking to buy or sell, look closely at the specific situation in that market and don’t be swayed by general media reports. It’s not unusual to see over supply and value adjustment in one suburb while there is an under supply and continued growth in another. During the school holidays, the auction market has slowed dramatically and made it a tough weekend to judge the market. Total auctions this weekend were down 35% on last week, and total volume was down 47%. But private sale volumes were up 5.6% on last week.

Fitzroy is our Suburb in focus this week where we looked at past sales compared to the recent sales. We are not aware of what (if any) improvements may have been done to each property, but four apartments showed growth from 2% p.a. to 12% p.a. demonstrating the idiosyncrasies of property and the need to get expert advice when buying or selling.

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