If you look at the news over the last 10 years, there seem to be constant talk about a property bubble. This video explains why our property market is very different and why a property bubble on the scale that the US had, is unlikely.

I’ve been talking to a lot of clients over the last six months and everyone seems to be tuning in to the news on the radio and media newspapers a lot of so-called property experts who are talking about a property bubble is going to happen here in Australia, meaning an expectation that prices are going to either burst and fall rapidly or that they’re going to decline in a slow fashion.

I wanted to share with you some ideas which are more fact-based to help you come to your own conclusion around whether or not you think there’s a property bubble happening here in Australia.

So first of all a third of real estate in Australia is actually owned outright, what that actually does is create a great safety net for the asset class of property in general since regardless of downturns in the economy we’re not necessarily going to see that one-third come crashing down or have that one-third taking radical action if something does go wrong.

Second of all the banking system in Australia in contrast to the rest of the world is actually highly conservative so even at peak of the GFC when we were hearing about banks all over the world who had been you know basically dishing out large numbers of these are these low-doc loans where effectively you needed no proof of income no proof of any asset base and no proof of capacity to repay the loan and yet they give you a loan even at the height of low doc loans here in Australia that was never the case and still to this day the concept of a load off loan is still that you’ve got to verify to some degree all of those three elements, again that provides another level of safety nine.

Added to that is the fact that you’ve got a third of Australians that own property alright you’ve got another third of Australians who own quite a large percentage of equity in their own homes what that means is that the average Australian and their attitude towards debt is that they don’t like to take a highly leveraged approach and again that creates another safety net or you know another player that would have to fail before we would see any kind of property crash as such.

The other thing to bear in mind here in Australia is that relative to the rest of the world we have a very low rate of default on our loan meaning that in Australia we take our debt incredibly seriously so the level of people defaulting on loans, under any circumstances, is always relatively low compared to the rest of the world.

So I think when you lay those few factors one on top of the other what you find is the strength of our safety net across the across the asset class is actually relatively strong and that’s not to say we couldn’t see a decline in property prices here and certainly some of the local factors driving things like small declines are things like heavy reliance on things like mining industry where we’ve had an oversupply of units in a very concentrated area where we’ve allowed foreign investors to come in and buy large percentages of the stock that we hold.

Those factors do contribute to potential declines or potential many bubbles in the Australian property market but as a whole my view is that the asset classes solid if you’re doing good research and if you’re very clear on how to navigate some of those minor property risks than what I think you’re doing is putting yourself in a position where regardless of the market conditions you’re always going to be in a position to make money.

Hope you found this video useful please as always love to hear from you leave your comments below and look forward to connecting with you in the future.  Signing off, Salena Kulkarni from Phoenix Wealth Group.

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