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Melbourne’s property bubble: Will it burst any time soon?

8 mins read
melbourne house price

The real estate market in Melbourne has been in the midst of a hot streak for a long time now. Housing prices have been on the rise and the demand for new properties seems to be at an all-time high. However, many experts have been warning about a property bubble that could burst any time, which has left many potential buyers uncertain about investing in the market.

Despite the warnings, it is important to note that Melbourne’s property market has always been resilient, with the city being known as one of the most stable property markets in the country. So, the question remains, will Melbourne’s property bubble truly burst any time soon?

What is a property bubble?

A property bubble, also known as a real estate bubble, is a situation where there is a rapid and continual increase in the prices of properties in a specific area. This price hike is often caused by a surge in demand, coupled with a limited supply of properties. As more and more people invest in properties, housing prices continue to rise, which often leads to a situation where properties are overvalued and become unaffordable to most people. Any disruption to the market can lead to a significant downturn in prices, resulting in a burst of the property bubble.

Factors contributing to Melbourne’s property bubble

The real estate market in Melbourne has been booming over the last decade and the high demand for properties in the area has led to an increase in housing prices. However, several factors have contributed to the current property bubble situation, including:

Population growth in Melbourne

Melbourne has always been a popular destination for those looking to move to Australia, with the city experiencing a significant increase in population in recent years. The increase in population has led to more demand for properties, which has, in turn, led to an increase in housing prices.

Low-interest rates

Since 2011, the Reserve Bank of Australia has set its interest rates at historic lows, which has led to a surge in housing investment. When interest rates are low, it becomes easier to borrow money, and investors are more likely to take out loans to buy properties, which drives up demand and housing prices.

Foreign investment

Melbourne has attracted significant foreign investment, especially from Chinese buyers, who see the city as a lucrative market for investment. While foreign investment can be good for the economy, it can also result in an overinflated property market, which can lead to a property bubble.

Supply shortage

Melbourne’s population growth has led to a shortage of properties, with demand far outstripping supply. As a result, housing prices have risen exponentially, making it extremely difficult for first-time buyers and low-income earners to enter the market.

Will Melbourne’s property bubble burst any time soon?

The million-dollar question remains- will Melbourne’s property bubble burst any time soon? While it is impossible to predict with certainty, many experts believe that Melbourne’s property market is overpriced and due for a correction. The signs are already there, with recent data showing a slowdown in prices and property sales in the city. The decline in foreign investment due to Covid-19 has also contributed to the slowdown.

However, despite the predicted slowdown, Melbourne’s property market is likely to remain resilient, with prices expected to continue to grow, but at a slower pace. This is because Melbourne is a major economic hub, with a diverse range of industries, and a strong track record of welcomed immigration.

How can buyers prepare for a property bubble burst in Melbourne?

If you are planning to buy a property in Melbourne, it is essential to take precautions to ensure that you are not caught up in a property bubble burst, and can weather any market corrections.

Some of the things you can do include:

Research the market

Do your due diligence and research the current state of the Melbourne property market. This will help you understand what you can afford, what areas are most in demand, and which areas are more vulnerable to market corrections.

Buy within your means

Make sure that you buy within your means, and avoid taking on too much debt, which can leave you vulnerable if prices fall or if you are unable to meet your repayments.

Be wary of off-the-plan properties

Off-the-plan properties can be a high-risk investment, particularly during a property bubble. If the market corrects, buyers can find themselves with a property that is worth far less than what they paid for it.

Be patient

Make sure you don’t rush into buying and are patient in your search for a property. This will give you time to weigh your options and make an informed decision.

FAQs

When will Melbourne’s property bubble burst?

It is impossible to predict when Melbourne’s property bubble will burst, but many experts believe that the market is overpriced and due for a correction. However, Melbourne’s track record as a stable property market means that the market is likely to remain resilient, and prices are expected to continue to grow, albeit at a slower pace.

Is it a good time to buy a property in Melbourne?

Despite ongoing concerns about a property bubble burst, many experts believe that Melbourne’s real estate market is still a viable investment. If you’re looking to buy a property, it’s important to do your research, and buy a property within your means.

Where can I find more information on buying a house in Melbourne?

For more information on buying a house in Melbourne, check out this Guide to Buying a House in Melbourne from Maz Real Estate.

Conclusion

The property bubble in Melbourne is a complex issue, with several factors contributing to the rise in property prices. While the market is showing signs of a slowdown, it is impossible to predict with certainty when the bubble will burst. However, by doing your research, buying within your means, and being patient, you can prepare yourself for any market corrections that may come your way.

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