Housing Affordability will only become more difficult.

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The gloom and doom from the media would make you think that property prices going up is a bad thing. Nothing could be further from the truth. The majority of wealthy people around the world have a large proportion of their wealth held as property. The average person will generate more wealth out of their family home than almost any other investment.

The Reserve Bank is seriously considering raising interest rates again this month. They know there is enormous investment in the pipeline happening in Australia. And with that comes wages growth and inflation. With that comes both growth and stabilisation within our economy. With that comes wealth to the average Australian. WITH THAT COMES PROPERTY PRICE GROWTH.

I am asked daily: “are we at the bottom of the property cycle?” I can answer quite honestly; “I don’t know, but we are not far off”

When the $100 Billion “plus” of investment in the mining sector comes online, property prices will jump. Not everywhere, but in the areas that have historically been highly sought after. AND THIS IS NOT MINING TOWNS. IT IS NOT NEW ESTATES. It is within 20 – 30 km of the CBD of our major cities. Most probable highest growth areas will be Sydney, Melbourne and Perth. It usually takes a little longer to filter through to Queensland.

In January 2008 when the GFC hit, everyone was talking 40% drops in the median price to housing. Professor Keene ending up taking a very long walk over that lost bet! The median price of property in Melbourne at the end of the March Quarter was $472,250. It is now $565,000. This is an increase of 20% over three years. This is down on the long term averages. Normally our median would see approximately 8%p.a. There was a drop in 2008, it then stabilised and climbed through 2009 and the early part of 2010, before arresting at its current levels. The last 30 years have seen recessions, market fluctuations, stock market crashes and the GFC and we still have the top third of suburbs in Melbourne averaging growth rates between 9% & 11%p.a.

If we look at individual suburbs in relatively good locations such as Prahran units: increase 28% increase; Elwood units: 36%
Yarraville house: increase 15% increase Kew 25%; Frankston: 18%

It is not a case of will the market rise, it is a case of WHEN will the market rise. The time to buy property is “As soon as you can afford to do so”

Ian James
Director JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.

2 comments on “Housing Affordability will only become more difficult.”

  1. Dave

    The time to buy property is “As soon as you can afford to do so”

    – So if one could afford to, should one have bought real estate in the US in 2007?

    • Ian James

      I have never advocated buying property in the US and I would not have done so at any time. They have more houses than population, their population is not increasing in the same fashion ours is and their banks offer non-recourse loans which I do not believe engender the same want to maintain the loan as it does in Australia. If you would have purchased in one of the top third of performing suburbs in Melbourne in 2007 you would have seen about 35% growth in your property, assuming you paid fair market back in 2007.

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