Bernard Salt on the Australian property market: ‘It’s a dangerous space to be in’
The “property bubble” has been a talk of the town for quite some time—international professionals and organisations saying properties in Australia are way overpriced so “it’s only a matter of time before everything falls apart”. Is it time for property investors in the country to withdraw from the market?
According to The Demographics Group’s Bernard Salt, one of Australia’s leading social commentators: “I think it's [only] a brave person that [can say] we're looking pretty good.”
However, he believes that hope remains for property investors. After all, property markets run in cycles—albeit unpredictable largely due to the fact that there are “markets within market”—and what’s stuck under now could grow and rise back up again over time. In fact, history has proven that most areas in Australia, particularly capital cities, tend to see property value grow after it drops and remains stagnant for even several years.
According to him: “There will be places of oversupply where values soften and fall. I don't say plummet, but subside is more the way I would look at it … and then simply go sideways.
“I think Sydney went sideways after the Sydney Olympics … All of that energy sucked into Sydney [in] 1996 [to] 2000, then the city just went sideways for five or six years.
“The same logic applies—subsidence in places and then just sideways until the market … spending, and wages … grows,” he added.
Keeping up with the market
While it’s undeniable that Australia’s property market is not at its best right now, there’s no reason for investors to lose hope. Property will continue to be a great way to create wealth as long as you keep making the right decision by remaining updated and well-informed about all factors that will have an impact on your property portfolio.
Bernard’s best advice for property investors: “Always look at the bigger picture”. According to him, the “bigger picture” will always provide an insight into broad demographic trends, which are powerful indicators of the level of demand for property.
He said: “If you're looking at 2012, Perth added … [around] 72,000 people in one year … It had never added anything like that … The market was absolutely booming at that time.”
“Today, Perth is growing by around about 25,000—it's almost cut to a third of what it was. It's still growing, but it's not growing at that pace. I think that pretty well sets the bigger picture agenda, the bigger picture demographic.
“You can look at areas of infrastructure growth, and workforce growth, and so forth, but if the bigger numbers [are] pushing against you, it just makes it harder,” Bernard explained further.
According to the social commentator, following his advice is as simple as asking the “big fundamental questions” in order to put together the “bigger picture narrative” in line with your own property investment journey.
In contrast with Perth, Western Australia is expected to make a comeback as it makes up a good third of the Australian continent that is incredibly rich in resources like minerals and agricultural products. It’s no question that the world favors a growing economy—the only question is “Are you happy to wait until it reaches its full potential?”
Bernard said: “If you want to be in and out in two or three years, it's a dangerous space to be in.”
“Time is a good thing when you're investing in properties,” Phil concluded.
Tune in to Bernard Salt’s episode on The Smart Property Investment Show to know more about the realities of investing in Australian property, where you should be channeling your dollars, and how our markets will develop in the future.
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