Australia experienced a property boom during the pandemic, with property values rising more than 20% over 2021, adding $126,700 to the median value of an Australian home. Some experts are predicting that this boom may be coming to an end. Find out what this could mean for you.
Australia’s property market defied expectations
According to CoreLogic, Australian house prices increased by 22% in 2021, led by the city of Sydney, where the prices rose by a record 25.3%. Some of the reasons for this inflated property pricing bubble have been record low interest rates, healthy household balance sheets, and a new desire to reinvest in the home due to an extended work from home environment that has become part of the new normal. However, this better-than-expected surge in the property market has fuelled fears that a crash may be forthcoming this year.
What’s in store for 2022?
One of the world’s most famous fund managers is warning that a “super bubble” has been building for more than a decade and may be in the process of bursting. Jeremy Grantham, co-founder of GMO, claims to have predicted the Japanese crash of 1989, the dotcom bust of 2000 and the global financial crisis of 2008. He is now warning of another similar crash in asset prices.
Trends for this year
Like any investments, there will be peaks and troughs in the market. Below are some handy tips for savvy investors to consider as the market changes.
- Look for value for money: Expensive may not equal better. You may want to emphasise value and hunt for investments that look to give you a safe return over more risky options.
- Carry cash reserves: There might be more lucrative buying opportunities at much more affordable prices after the bubble bursts. This may be a good time for you to build your cash equity.
- Do not get carried away by FOMO (fear of missing out): If a crash is imminent, now is probably not the time to compete with your neighbour to have a more lavish backyard or look to buy that holiday home you’ve been eyeing.
Consider your current and future investments
Being prepared in case a downturn happens unexpectedly can be beneficial. If you need help re-evaluating your finances, book a time to chat here and let’s talk over what’s best for you.
Any advice is general in nature only and has been prepared without considering your needs, objectives, or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors.