For Australians, real estate is something of a national obsession.
That’s understandable given it often is the biggest investment most of us will ever make.
For more than a decade now, there have been alarmists and scaremongers claiming the Australian property market was a bubble awaiting a pin.
Bets have been made, reputations were staked upon it. Mostly academics, they made comparisons with events in the US and Europe, digging ever deeper into complex calculations designed to prove their theory.
The crash never arrived. Instead, Australia experienced an orderly slowdown in property prices which in some areas was quite steep. Price declines of around 7 per cent represented some of the biggest falls in history.
It’s clear now though, that our property market is in recovery. There have been some solid gains in residential real estate prices since they troughed last year. But on a national level, Australian residential housing is still well below the price levels of 2010.
It is pretty clear that the interest cuts of the past 18 months now are beginning to make their mark.
But this time around, the recovery is likely to be different.
In previous property recoveries, prices have moved higher in the early phase at a cracking pace, usually between 10 and 20 per cent.
That’s unlikely to happen this time around. Instead, the real estate recovery is likely to be tentative and patchy.
Perth is likely to maintain a healthy premium for a while even as the mining boom begins to wind down. But Sydney, after serious falls during the past two years, is where the action is right now.
There is more demand for housing in Sydney than there is supply. Melbourne has the opposite problem. Two years of government sponsored construction has left the Victorian capital oversupplied and there is an abundance of inner city medium density dwellings on the market.
It is a similar story in south east Queensland, and particularly the Gold Coast, where property owners have notched up some spectacular losses during the past three years.
In the next few weeks, we’ll look at the investment case for real estate and how it stacks up against other investments like shares.
We’ll also check out how to benefit from a real estate recovery without the expense of buying a property.