A friend of mine has an interesting way of describing what has happened to financial markets across the world.
He likens the present downturn to the way people feel after a “big night on the town.“
“You party hard, you do it hard the next day” is his philosophy.
In his view, because financial markets have “partied” for the last three years or so – the fall we are currently experiencing is inevitable.
An analysis of real estate growth in 2005, 2006 and 2007 in Western Australia shows that property values did in fact skyrocket in this State.
Traditionally, Perth property values double every seven to 10 years.
All of a sudden, they were doubling in two or three years.
Blind Freddy could have seen that that sort of growth was unsustainable.
Unfortunately as is human nature, the blind Freddys got lost in a boom amongst the wave of positive press and speculation stories that characterised the period.
The good news is that despite all the doom and gloom that has been appearing in the press, all is not lost.
That’s because the recent downturn can be explained as a correction rather than any major structural issue.
To put it another way, property prices are still tracking ahead of where they traditionally should be.
David Fear (0403 052 222)
Director
Altus Real Estate