Deleveraging hurting the property market
Since the GFC Perth property has tracked sideways and slightly down. There have been a couple of surges largely due to the First Homebuyer’s Boost and recently low stock levels in some areas like near the airport (City of Belmont), but on the whole the market has been fairly anaemic. Let’s face it, property has had a wonderful run. Over the last 20 years it has outperformed the stock market leaving us with some of the most expensive property in the world. It has seemed a sure winner for buyers that to buy and hold you were guaranteed to make money and the more you could buy and hold the more you could make and the richer you could become. Times have changed.
One of the reasons if not the main reason property has risen so high is the willingness of buyers to take on an increasingly larger amount of debt. So much debt in fact that Australians are among the most indebted people on Earth and we are more than a little worried about that now. Statistics are showing that even with recent interest rate cuts people are saving and not spending. The conversation around the barbeque has changed from ‘how big is my house and how many investment properties I own’ to ‘how small is my bank loan’. We are what is technically called deleveraging and while concerns over Europe and a slowing and precariously placed world economy cloud the horizon we will likely continue to do so.
There will always be good buys in any market and there will always be people wanting to own homes but if you think we will return soon to boom times and that we are due for a cyclical surge in prices then you might want to hedge your bets.