What goes up…
Sir Isaac Newton discovered gravity in 1687, explaining that what goes up must always come down. Not only does this apply to every object in the known universe, but also to the property market. Historically when the market goes up it has always in every case come back down and vice versa. The ultimate question is will it be like a bubble bursting or like a kettle coming off the boil?
In the instance of a bubble, property prices can fall violently fast with little warning. “Housing bubbles are temporary periods of months or years characterized by high demand, low supply and inflated prices above fundamentals (Nielson, 2020). Many of these elements are being seen in today’s market and analyzed in our previous market insight. The last time we witnessed a bubble bursting was in Melbourne during the 1890s after the ‘Land Boom’. Following this was a great period of depression that rippled throughout all of the Australian colonies ruining political reputations, incomes and lives (Phillips, 2015). In this case, property prices plummeted extremely fast and without warning. Australians have learnt from this crisis and we now utilise monetary policies such as adjusting the cash rate to ensure bubbles do not burst.
If we are not in a bubble, it is likely that the market which is currently on full heat, boiling like a kettle, will simmer down slowly. There have been some early indications of this happening with predictions today from Gareth Aird (Head of CBA Australian Economics) “…expecting the RBA to commence normalizing the cash rate in November 2022 means that we expect national dwelling prices to peak in late 2022 around 7% higher than end 2021 levels. Forecasting a drop of 8% in Brisbane in 2023.” This would be the desired outcome and will therefore lead us out of this boom and we will proceed into the next cycle, the 'Slow Down'.
We recommend that if you have been thinking of selling a residential real estate asset you should move quickly to maximise your profit now whilst we are still at the peak of the market.
