“Buy a house before property prices are beyond your reach,” was the message from a recent Yahoo article on money. The article says in no uncertain terms that property prices are heading upwards again. In fact to quote directly from the article, “Property buyers are being urged to take the plunge early in 2010 to avoid missing out on purchasing their dream property at a price they can afford”.
Someone called Meighan Hetherington, managing director of Property Pursuit in Brisbane said, “Buyers need to realise that the peaks and troughs of the property market are shortening; so we are now seeing the start of a property market surge, reminiscent of 2007."
Then the article says in bold writing “Don’t wait until it’s too late”
I’m not sure what planet these people are on. With Australia having 100.4 debts to GDP, why in God’s name would there be a rise in property prices? People are struggling to pay for their houses right now.
House prices in Australia are hugely inflated and expensive compared to the rest of the world. Yet for some reason these people who can’t see that we are already in a property bubble are acting like cheerleaders trying to work the property market up higher. And worst of all, reporters with national audiences like the Yahoo article believe them. That we need to pump more air into this already overinflated bubble.
USA, England and New Zealand have had big falls in their home prices. Not to mention most of Europe. But for some strange reason Australia has avoided this bubble popping. Yet people believe that there is still room for the market to move upwards.
Well I guess as long as there is a bigger fool to lend more money from the bank, the property market will continue to keep going up. Remember that in Victoria the medium house price has just passed the half a million dollar mark to $520,000. No this is not for a mansion. This is the price for a medium house. If Meighan Hetherington is correct and she talks of a surge, what could that mean for a medium house price in Victoria?
Well let’s say it goes up by 5% per year over the next three years, this house would now be worth $601,966.
Up by 7% per year over the next three years, this house would now be worth $637,022.
Up by 10% per year over the next three years, this house would now be worth $692,120.
Up by 12% per year over the next three years, this house would now be worth $730,562.
However, let’s look at the words Meighan Hetherington uses, “surge, reminiscent of 2007”. When I think of the word surge, that makes me think of 15% to 20% a year; not 1% to 14%. In fact the dictionary describes the word surge as the following, a strong, wavelike, forward movement, rush, or sweep. That definition of the word definitely describes prices moving above 15%.
Well 15% per year over the next three years, this house would now be worth $790,855.
And 20% per year over the next three years, this house would now be worth $898,560.
And this is for the medium priced house. Can you see what I mean by this?
What scares me is someone reading the Yahoo article might just decide to buy a house that they can’t afford based on the predictions from someone else. The article and language including the title made it seem as if you are not in the housing market right now, forget about getting into it in the future. Some people might purchase a house thinking, “Sure I can’t afford it now, however with property going to SURGE, it’s like money in the bank”.
Any research of the property market will soon show you this is probably not the case. However in being fair and balanced, I would like to say that this is only my opinion. I have been known to be wrong in the past and I’m sure that I will be wrong in the future. You need to make up your own mind.
Thanks Adam Goulding (Also know as Mr Home Budget)
www.mrhomebudget.com.au
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