Bursting the bubble myth

Posted on September 21, 2013 by | 0 Comments
House prices may be rising but chronic undersupply makes a traditional bubble unlikely

House prices may be rising in Australia, but chronic undersupply makes a traditional bubble unlikely. Picture: Bob Barker Source: Supplied

INVESTING in property is a no-brainer at the moment. Prices have bottomed, auction clearance rates are on fire, especially in Sydney, and you can get a fixed rate mortgage for 4.8 per cent with 100 per cent gearing, 70 per cent in your super fund.

And the experts are now saying there’ll be another housing bubble. What could be better?

There’s no sign of a housing bubble yet: values are only just back to where they were three years ago. Will there be one next year or the year after? Who knows? But one sure way to make it happen is to sternly warn about one.

By way of confirmation, a lot of the coverage of Tuesday’s Reserve Bank minutes plucked out the comment that: “Property gearing in self-managed superannuation funds was one area identified where households could be starting to take some risk with their finances.”

Yes, well, you’d be mad not to move some of your DIY super money from bank shares into geared residential property.

The bank share index is up 54 per cent in the past 12 months while the median house price is up 7 per cent over the same period.

If there’s a bubble it’s in high-yielding shares, especially banks; it’s time to take the profits and put them to work in the next bubble.

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