News that drives me mad
town in a 2004 Barina. This kind of sensationalised news drives me mad.
Anyone who has tried to secure a home loan in the past few years will know it isn’t easy getting credit.
Unless you have a good deposit, a spotless credit rating and stable income, getting a mortgage can be a challenge.
In my experience, lenders have not turned the clock back to the days of easy money.
It’s important to recognise that this investment-gonewrong story was in a mining town. A home in some of these mining areas could be worth $100,000 one day and, a short time later, priced at more than $600,000.
These types of markets are boom and bust. They’re high risk. You buy knowing the profits could be high but so could the losses.
If you were planning to buy multiple investment properties you might take a punt on one or two homes in a resource-driven location, but not more.
The next thing I want to clarify is the difference between “value” and “price”, which are often confused.
The prices of typical Aussie homes have never fallen 50 per cent in one go. Never.
Imagine if they did. Anyone sensible would start buying where they could. Sellers would refuse to sell. Eventually prices would go back up.
What can occur during boom years is that buyers pay ridiculous prices for high-risk properties, like an off-the-plan penthouse, a new McMansion backing onto a six-lane highway or, of course, a house in a mining town.
Then the general market softens. Stock exceeds demand and buyers disappear. All that can literally happen overnight.
Sadly, a handful of homeowners over recent decades have been hit by losses of up to 25 per cent, but in many cases the falls were from prices paid during the height of the boom. The prices they paid at the time of purchase were nowhere near the value of the property they were buying.
Ultimately, some localities will experience more volatile housing market: sea or tree change locations, towns with only one industry or mining towns.
But these areas don’t mirror the rest of Australia. In most places it is usually only a matter of time before your home that lost dollars bounces back.
Andrew Winter hosts
on the Lifestyle channel