There have been a lot of rumours floating around amongst financial analysts and media figures about the possibility of the Australian housing market headed for a crash. Those rumours have become even more urgent as analysts observe that Australia managed to largely dodge the big hit that most other markets experienced during the Global Financial Crisis. Is a crash ultimately inevitable?
The question is impossible to answer definitively, but while the gradual ups and down of any financial market may be inevitable, as we saw in the US a disastrous crash usually comes about by a number of factors building up over time to topple the market.
So how did Australia manage to survive a real estate crisis that was felt across the world? There are a few factors that make the Australian market different than other markets that helped avoid a housing market crash.
- One of the primary factors that helped keep Australia’s housing market healthy is the country’s growing population. When population increases, you have an increased demand for housing, and in Australia this demand in most areas is larger than the housing supply that was available, which holds prices steady and drives prices higher over time.
- More conservative banking policies saw that our loans issued had far better security underpinning them and a far greater recourse to the individual. In the US, loans were made in excess of 100% of the purchase price, without full recourse to the borrower.
- The demand from China for our mining resources remained relatively high, and has taken some time to cool. It should now stabilize and remain and more sustainable levels. Resources will always be in need and Australia is perfectly placed to supply that need.
- Finally, Australia has been experiencing a lot of property being bought by foreign investors, largely from Asian countries, and this influx of foreign funds has also helped to keep the market stimulated and strong.
All this isn’t to say that one or all of these factors could change, which could lead to a crash, but for now the market remains strong and dependable. Join our Property Investor Update to be kept informed of my latest insights into the market.