The Herald Sun Money section has thrown out the “R” word. Recession means an economic slowdown, evidenced by two consecutive quarters of negative growth. We have the Reserve Bank on one hand holding interest rates where they are, whilst we have banks arbitrarily increasing them to protect their profits. We have speculators in the market place buying up oil and sending the prices through the roof, regardless of the fact the supply has remained constant, and in fact the northern hemisphere has lowered usage; probably because of the price increase. The lending for new building is down approx 20% and the Master Builders Association believes the new home market will be in the doldrums for the next 12 – 18 months at least. This is while the State Government is telling us we will need to build an additional 380,000 new dwellings to house the highest level of immigration we have seen in 20 years.
There are so many contradictions on the economic landscape that it is difficult for anyone to work out what will happen over the next few years. It is a time when most predictions begin to follow historical precedent. We know that over the past 25 years property values in Melbourne’s suburbs have grown between 10% and 12% where the amenities are good, where public transport is evident and where Owner occupiers prefer to live. We need not even mention the fact that the vacancy rate for rentals is less than 1%. People have to live somewhere!!!!
There will always be sales of properties, either because the vendor is economically forced to sell (loss of job, interest rates raised too high, cost of living out weighing income) or socially forced to sell (births, deaths, marriages, divorces, employment relocation). Obviously the motivation of the vendor can play a part in what the property will finally sell for, but either way the market is usually met.
Buying whilst the market is flat and holding until it picks up again is the strategy that most long term property investors will tell you almost never fails. It does still come down to buying the right property at the right price in the right time.
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