Skip to main content

Advertisement

Advertisement

Property price fall of just 5% shows market is resilient

I refer to the report, “Private home prices to fall 10% more over 2 years: BNP” (June 23).

I refer to the report, “Private home prices to fall 10% more over 2 years: BNP” (June 23).

I have read some analysts continually predicting steep price falls since 2010. Eventually they must get it right. Even a broken clock is right twice a day. They would invariably cite reasons such as supply-demand imbalance and rising interest rates. Such fears have been misplaced.

So far, the market correction has been a mere 5 per cent. Over a period of four years, that is roughly 1 per cent annually.

To support their argument, they have cited the Total Debt Servicing Ratio, a loan curb that was introduced in June 2013. However, it has not brought a steep price drop; the market has stayed resilient.

In past decades, major corrections were caused by external shocks, such as a financial crisis or global recession resulting in unemployment and mortgage loan defaults. Anything less would be unlikely to knock the bottom out of the market.

For that to happen, we would need a crisis as severe as previous busts. Boom and bust cycles exist, repeating reliably and predictably in periodicity since the 1800s.

So far, there is little evidence anything has changed to prevent another downturn, then recession. Should history repeat itself, we can expect the next trough around 2017.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.