The Australian Property Market Bubble Myth by Konrad Bobilak
As Melbourne moves into 6:30pm on the property clock, with Auction Clearance Rates hovering around the 60% mark, the ‘doom and gloom’ sears have once again disappeared as quickly as they came into their dark cubicles, libraries, or university research departments.
I must confess that I really miss those Apocalyptic articles of the seven horseman and the Australian Property Market Bubble finally crashing, but yet again, the market has defiantly beaten the academics predictions, and once again cashed up investors are snapping up bargains at the bottom of the property cycle, before the next upturn of the market begins to appear on the horizon.
So let me ask you a question…
Will you buy property in Melbourne before the next boom?
Or will you wait until the property cycle moves into an upturn and pay a premium for property?
Many of our clients who secured townhouses in Altona, Thornbury, Aspendale, and Mentone have realized a nice $50,000 to $100,000 capital appreciation on their townhouses since 2009. (and that was during the GFC!)
One of the most fundamental principles of investing in property in Australia is to appreciate that the market moves in distinct cycles which are characterised by periods of strong capital growth and demand for properties, through to periods of a flat-lining market, following periods of distinctive falling median prices, lower demand for properties, and a decline in property prices. The money is made by both the timing of the market, and of time in the market. Hence my advice right now to investors is not to wait to buy property, rather, buy property and wait.
The general rule of thumb is that these property cycles last 7 to 10 years, and can be segmented into 4 main parts, the ‘Peak of the Market’ being the shortest of the four;
- Peak of the Property Market – High capital growth, auction clearance rates of 85 per cent plus.
- Decline of the Property Market – Declining capital growth, auction clearance rates dropping from 80 per cent to 60 and 50 per cent.
- Bottom of the Property Market – Extended periods of low capital growth, auction clearance rates of 45 percent to 50 per cent. (this is when you get in)
- Growth of the Property Market – Increasing capital growth, increase demand for property, increasing auction clearance rates, 55 per cent to 75 per cent.
Bottom line is; the smart investors practice ‘counter cyclical’ investing, that is, they do the exact opposite of what the general public does, mainly because historically they always get it wrong.
My advice is to bite the bullet and join me at an upcoming 21st Century Property Direct Express Weekend, which I am holding on the 14th and 15th of April and 12th and 13th of May 2012. www.PropertyExpressWeekend.com
Book in quick as seating is strictly limited to 40 attendees!
With regards to this month’s newsletter, I have a number of brilliant articles. The first deals with our amazing land banking strategy, where i explain the concept of land banking generically. Please note that we only have 87 land blocks left in Acacia Banks, so unfortunately many of our members will miss out on these, and it will be some time before I am able to source the next project.
The second article deals with Self Managed Superfund (SMSF) and how borrowing in SMSF really works. As you be aware many of our members have set up s SMSF and are securing land banking and direct property via this structure. There is also a brilliant article discussing the problems with buying in the docklands area, and the historically low returns that uneducated investors have generated over the last 10 years. If you have attended any of my past live events, you would know that high density developments have never done well in Australia, the Gold Coast is a perfect example of a worst case scenario.
Finally I have an recent article in the Herald Sun published on the 16th of February 2012 titled “Like Winning Lotto’, documenting the case of a small group of 12 families in Melbourne’s outer fringe area of Rockbank who were offered $47 million dollars for their combined parcel of land from a developer. The couple featured in the article, Mark and Judie Sobotnicki, who bought their property for only $200,000 a decade ago which consisted of 13.5 hectares. The combined parcel located between Caroline Springs and Melbourne probably represents the biggest privately owned sale of freehold land in Victoria over the past 5 years according to selling agents Oliver Hume.
For those who have not check out the land banking website here it is; www.LandBanking.com.au
This is Konrad Bobilak wishing you successful property investing.
CEO 21st Century Property Direct