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Love It Or List It Australia

What you need to know about the 'property bubble'

Love It or List It Australia host Andrew Winter explains why you shouldn't worry about the bubble if you do some careful planning.

The property market is a cycle - there's boom time and there's the absolute dead-end slump.

Every single market - including inner cities - goes through that cycle, with varying degrees of success and failure.

A prized inner city suburb will boom massively, but won’t bust quite as much.

A regional area will bust much more heavily. However, the entry points and profits are normally easier to achieve in these rural locations.

Solid city markets are fairly comfortable. Instead of the bubble bursting, that $1m home that was selling for $1.5m, might now go for $940,000 - but realistically it was only ever worth $1m.

Demand pushed it a bit higher, and now you’ve got a bit less because demand was down.

It's usually a result of people starting to panic and sell - that’s when supply increases and the prices come tumbling dramatically.

Plan B

If you’re still living in the house while the market is down, it won't make too much of a difference.

If you have to leave it for any reason, rent it out and eventually the value will bounce back.

When you’re buying a property, always look at the worst case scenario. You lose your job. You can't afford the repayments. You get divorced.

Ensure you have a plan B if you can't cover home loan costs but the time isn't right to sell.

Would the property's rental value allow you to cover your costs?

The only time the market takes decades to bounce back is in very rural remote areas. In the big cities, even the main areas of WA, you don’t get that kind of shock.

Sometimes growth doesn't happen and when it does it takes years and years in these regional areas.

So it's important to remember that property is a long-term game.

You can make quick profits and people do, but if you look across every decade, you'll see that these opportunities come around just one to three in every ten years - even in the big cities.

For more property tips, watch How To Be Mortgage Free With Sarah Beeny on Lifestyle from August 16 at 8:30pm.

 
 

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