Mythbusting the Property Market

The best time to buy, sell, or invest in property is simply when you’re ready – with enough savings, stable income, and clear housing needs. Making property decisions based on your situation rather than market predictions usually works out better.

2. House prices double every 10 years

While it’s commonly claimed that house prices double every 10 years, the reality is more complex and heavily dependent on location and timing. Different cities and regions can experience vastly different growth rates, with some areas seeing prices more than double while others might see modest growth or even decline. Local economic conditions, infrastructure development, and population trends all play crucial roles in determining property price movements.

Property price growth tends to move in cycles rather than following a steady upward trajectory. Markets typically experience periods of strong growth followed by stabilisation or occasional declines. Rather than relying on a “doubling every decade” rule of thumb, buyers should focus on their own circumstances and ability to hold property long-term to weather these market fluctuations.

3. House prices could see a sharp correction so I should wait for that to happen before I buy

Housing markets have proven remarkably stable, even during major economic shocks. The 2007-09 financial crisis and COVID-19 pandemic only saw brief price drops of around six per cent before recovering. In Australia, strong population growth and limited new housing supply, especially in cities, continue to support prices.

While housing affordability is a real concern, several factors prevent major price drops: strict building regulations limit new housing, population growth drives ongoing demand, and job concentration in cities keeps urban housing in high demand. Instead of a sharp correction, history suggests we’re more likely to see periods where prices level out before growing again.

4. Rents are rising because of landlords

Rental prices are primarily driven by market supply and demand, not individual landlord decisions. When there are plenty of rental options available, tenants can simply choose cheaper properties, forcing landlords to keep rents competitive or risk having empty properties and no income. Landlords generally can’t raise rents above market rates because tenants will move to more affordable options.

What actually drives rent increases is the balance of rental properties versus people looking to rent. When there’s strong demand (due to factors like population growth, more international students, or people unable to buy) but limited rental supply, competition among tenants pushes rents up. Recent rent rises have more to do with housing shortages and increased demand than individual landlord decisions. This is why we often see rents stay flat or even fall in areas with lots of new apartments or declining populations.

5. Negative gearing is to blame for Australia’s high house prices

While negative gearing makes property investment more attractive by offering tax benefits, it’s too simplistic to blame it alone for high house prices. Many countries without negative gearing also face significant housing affordability challenges. The main drivers of Australian house prices include limited housing supply in desirable areas, strong population growth, strict planning regulations, and the concentration of jobs in major cities.

Property investment decisions involve many factors beyond tax benefits – location, expected capital growth, rental yield, interest rates, and maintenance costs all play important roles. Negative gearing is just one piece of a complex puzzle that includes broader economic factors like household income levels, lending policies, and construction costs. Looking at housing affordability through the single lens of negative gearing misses these other crucial market forces.

When you buy a home to live in rather than for investment, leverage is particularly powerful because you’re getting two benefits – a place to live and an investment. With $100,000 saved, you could buy a $500,000 home with an 80 per cent loan. If the property goes up 10 per cent to $550,000, you’ve made $50,000 on your $100,000 – a 50 per cent return. Meanwhile, you’ve had a place to live with fixed mortgage payments instead of rising rents.

In contrast, if you rent and invest your $100,000 in shares or bitcoin, most people wouldn’t borrow an extra $400,000 for these investments due to higher interest rates and market volatility. This means that same 10 per cent rise would only give you $10,000 on your $100,000 – and you’d still be paying rent. The ability to safely use leverage while getting both housing and investment benefits makes buying a home to live in uniquely attractive.

7. You can only afford a first home if you have money from the “Bank of Mum and Dad”

While parental support through the “Bank of Mum and Dad” helps some buyers enter the market sooner, it’s not the only path to home ownership. There are multiple ways to get into the market with a smaller deposit, including government incentives like low deposit schemes without mortgage insurance, stamp duty exemptions, and cash grants for new homes. The key is understanding what you’re eligible for and exploring all available options.

First home buyers can also consider alternative strategies like rentvesting (buying an investment property while renting where you want to live), buying with friends or family members, or starting with a smaller property or less desirable location. While these options might mean compromising on your ideal first home, they provide a stepping stone into the market – remember, most people only stay in their first home for less than seven years before upgrading.

The important thing is getting into the market when you’re financially ready, rather than waiting for perfect conditions or relying solely on parental support.