Has the Melbourne Bubble Burst?

Has the Melbourne Bubble Burst?
An Editorial By Phil Anderson - Tuesday June 20th

Cries of a pending property implosion are nothing new, especially towards the end of a particularly strong growth cycle. The latest prediction from a leading investment bank has claimed that Sydney and Melbourne’s seemingly endless price growth is about to reverse. In reality both these markets contain many property markets and suburbs, so the question is which of these suburbs have peaked?

The overall position that we have seen recently by UBS economists Scott Haslem, George Tharenou and Jim Xu is that the Sydney and Melbourne markets are generally set to ‘correct but not collapse’.

The foundation to their argument is that the current rate of property growth in these markets, which has been roughly four times faster than the growth of income, is an unsustainable situation. UBS also stated that it’s their expectation that property growth will slow to 7 per cent in 2017 and potentially drop to zero percent in 2018.

But thanks to the strong population growth any correction in property prices in these markets would potentially be caught by a fairly sturdy safety net.

 Even property analysts who disagree with the notion that our two largest cities are coming close to the conclusion of their current growth phase, concede that if these cities have not peaked yet, they may very well get there soon. This includes SQM Researcher Louis Christopher who stated recently that it’s “really too early to call the end of Sydney and Melbourne’s housing boom”, and then postulated, “Could we hit the peak late this year? Yes, it is possible we could”.

Signs are appearing that key property markets in both Sydney and Melbourne are reaching their peak, and to name names some of these would include Springvale, Croydon and Alphington in Melbourne, and recently we’ve seen an oversupply of units in Sydney suburbs Zetland, Waterloo and Botany potentially put an end to their run.

While it is important to stay informed about which markets are reaching their natural “slow down” phase, it’s equally important to remember that other suburbs entering a new growth phase have only just begun to enjoy the first grass roots of capital gains.

At my next event I’ll be analysing and lifting the veil on several key Melbourne suburbs that have finished her growth cycle that all investors need to be aware of, as well as the ones that are due to take the place of Sydney and Melbourne as the next markets to watch. It really will be a must see for anyone interested in buying an investment property this year. To register now click the banner below.