Property only ever goes up seems to be tattooed on the brains of most westerners but then they never seem to be able to understand cycles, both short and long term.
Of course, property does always go up if you look at the long term trend (cycle) but working within this are many different shorter term cycles as some Australian property owners have recently found out to their cost.
A 3 bed brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market
Only one person bid on the house in the city's west
Increasing petrol prices (we think this is an important point) appear to be compounding the impact of repeated interest rate rises on properties in Sydney's outlying suburbs by driving prices down.
Mr Beatty (a local Estate Agent) said: "There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes
Those who are over exposed to property should seriously consider studying the property cycles over the last 50 years and then work out whether they’ll be able to survive a decline of 25% in property values should it occur.
If not, they should consider reducing their risk by selling their holdings down to more manageable levels.
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