Last Sunday, Channel 9’s 60 Minutes program ran a segment suggesting that Australia is about to see the biggest property crash in our history. There was talk of a 40% drop in property value in our major cities and the end of the seemingly endless growth cycle. In my view, 60 Minutes have taken the extreme position, it makes a better story, but the problem is real.
The average Australian is far more bullish on property than any other asset. I‘ve heard numerous people say that you can’t lose money on property; we also hear enormous growth expectations like property doubles every 7 years. Most people don’t blink about gearing up to 90% or more into an investment property, often using equity in their residential property to front up their 10% contribution to the property. That mindset has all the hallmarks of a bubble, and, as we know, bubbles burst.