Crash or No Crash?

Crash or no Crash?

Are property values going to be under pressure in the coming months and year? Well if you are to believe what the leading economists, Reserve Bank and now the OECD, then Australia is heading for a correction on the property market. If you look at the raw data then it is reasonable to conclude they are correct in the prognosis for the future.

If you look at the Australian property market, capital city by city, then you might be more disbelieving of the dire warnings that have been given. Over the last year capital city home values increased by 7.9% over the 12 months to April, the rate of growth has varied significantly across each capital city but this is the average increase of all combined cities.

If you look at each city then this is a different story.  The overall growth in the capital city index is largely being driven by Australia’s two biggest cities: Sydney and Melbourne, which have been recording a much more rapid rate of growth than the other capitals. Each capital city except Darwin (-1.6%) has recorded an increase in home values over the past year with Sydney (14.5%) and Melbourne (6.9%) recording much stronger growth than the other capital cities. Across the remaining cities, annual value growth has been recorded at: 2.2% in Brisbane, 1.7% in Adelaide, 0.3% in Perth, 1.2% in Hobart and 1.1% in Canberra (Information supplied by Corelogic RpData).

When you look at these figures it would appear only Sydney and Melbourne have had growth above that of inflation and in fact all the others capital cities including Brisbane have growth below inflation.

Does this mean if Sydney has a correction in property values the others will escape? No!  As with a pond when you drop a stone into the water a ripple will occur decreasing in size as it radiates outward. What this means is whilst we may see a correction of between 10-20% in house prices in Sydney, Brisbane will see 5%-10% correction.

When will this correction occur? Well May saw a clear down turn in price increases in Sydney so it looks like the Sydney market has peaked and may well be starting to head into its slower growth period.

So how does that affect people looking to sell their homes in the Samford and Dayboro Valley regions? If you are currently on the market or looking to sell your home soon, you need to ensure your home is not overpriced.  This may lead to your home taking longer to sell and in a falling market you end up chasing the market down. This could cost you tens of thousands in lost sales potential.

Fox and Co will provide you with a honest appraisal range for your home based on the current market conditions. If you would like to have a free no obligation appraisal of your home then call 3289-2828.

Artilce by Craig Corner- Managing Director of Fox & Co