6. “Property prices never go backwards”
This view is often held by young investors who have only experienced strong market conditions.
Many parts of Australia were fortunate during the 2000’s to experience an unprecedented boom in property prices that seemed like it might continue forever. While in the long run property markets tend to go forward due to scarcity of land and increasing population, they tend to be cyclical in nature and often go backwards in the interim as experienced in late 2008 into 2010.
Economic factors both domestically and internationally can have a rapid and damaging impact on local property markets. A severe economic downturn in China, for instance, could see a decrease in demand for Australia’s resources. In some mining communities that would likely result in a decrease in property prices and rental yields.