A few months ago, I hosted a live webinar for about 350 Australian property investors. A big question on everyone's mind has been, "Are we in a bubble?"
The answer may seem obvious to you, but one of my jobs is to try to lead people into understanding how to reach their own conclusions. There are too many people giving bad advice in the property industry in Australia, trying to tell people what they should believe about the future of home prices.
Unfortunately, most of these "professionals" are highly incentivised to get you to follow their bad advice. The more I can equip people to form their own opinions, the less likely they are to do dumb stuff with their money.
Here's a segment from the webinar where I explain the seven primary things that have caused real estate, particularly in Sydney and Melbourne, to become so expensive. The question then remains for investors, "How sustainable are each of these seven drivers of value?"
In case you couldn't be bothered to watch the entire video, here's a quick summary of the seven drivers of value:
1. strong population growth
2. strong employment
3. wage growth
4. scarcity of homes near jobs
5. low interest rates
6. loose lending policies
7. investor tax incentives
Of course, an eighth could be foreign investors, but that one is really tied to low interest rates and the creation of money in China.
Which of these seven drivers do you think has contributed the most to high property prices in Australia?
Jason Staggers