The wheels of the property cycle are always turning.

The wheels of the property cycle are always turning.  Despite its overall steady climb, Melbourne real estate has had half a dozen “downs” since 1980.  Yet, adjusted for inflation, prices in Stonnington and Bayside have nearly doubled over the past ten years. For many, that’s tax free.

Here’s more reasons, since our last blog, why we think Melbourne property will be fine:

  • Led by the US, the global economy is improving. Aussie exports are flying out the door; creating jobs and growth. This supports property and debt serviceability, creating willing buyers.
  • Our economy is looking good. Growth jumped to 3.4% in the June quarter and anything over 3% is great news. Inflation is low and contained and business confidence is strong.
  • Thanks to APRA, anyone who borrowed in the last four years was “stress tested” at 7% principal and interest. Yes, some investors took on too much speculative risk, but they're a small percentage. Our banking system is sound.
  • The AUD was last seen threatening to slide below $US70c, so everything from our iron ore to university degrees is cheaper overseas. The AUD is doing the RBA’s heavy lifting. Which brings us to our final point…
  • There is very little chance the RBA will raise rates in the next 12 months; probably longer. Home owners will be able to meet payments and there’ll not be a panicked market to kick off a messy landing.

The next Kay & Burton market report will focus on Interest Rates.

Market Insights

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