The housing market is the largest investment in most people’s lives. When you buy a house, you’re buying an idea of yourself — a place to live that meets your needs, a stable base to build a life around, and a symbol of your status.

But there are times when the housing market gets out of control. It can affect all kinds of people, and the cycle can be a tough one. It can also wreak havoc on the economy, but what comes next?

After the pandemic property boom that occurred in the past year, Australia is now at the tail end of the boom. Housing values in capital cities like Sydney and Melbourne are declining, while some regions in the country are positioned for future growth.

The good news about the housing market is that there are always going to be people who want to buy property. The demand will always be there, so if you’re thinking about buying your first home or moving up in price, it’s never too late — you just have to plan ahead!

Understanding a property boom

A property boom is a period of rapid growth in home prices, which is then followed by a period of decreased sales and construction. It occurs when property prices rise rapidly due to an increase in the supply of affordable housing.

There is a large demand for housing, and developers are motivated to build more homes. This increases the supply of housing options, which lowers the prices of homes and makes it easier for people to buy their own.

A property boom is caused by a combination of factors, such as:

  • Low interest rates
  • High levels of capital gains
  • Strong economic growth
  • An increase in the supply of land
  • Increased population and migration patterns that drive demand
  • An increase in disposable income among people who own property

When a property boom ends, there is a lot of uncertainty and instability as the market has not yet had time to recover and stabilise. When this happens, there are several possible scenarios.

Homes can become more valuable than they were before the boom began, but this isn’t always true — if a house is bought during a real estate boom it will probably cost more than what it would have if it were bought at any other time.

What happens after a property boom?

Property booms are usually followed by property busts. A property bust occurs when there is a decrease in demand for housing and the value of properties subsequently reduces.

In order to reduce the price of houses, investors sell them quickly, leading to decreased demand. As a result, there is less money available for developers who build new houses, which then leads to a reduction in supply.

A property bust occurs when prices fall rapidly, which is caused by:

  • House prices rising too fast — this can be a combination of too much debt and low interest rates. If you have taken on large amounts of debt to buy your house, this could cause problems when its value falls.
  • A fall in the economy — it becomes harder for people with fixed incomes to afford housing. This may also happen if there’s another financial crisis like 2008–2009, caused by housing bubbles popping all over Europe and America.
  • High interest rates — if these get too high, people will stop borrowing money because they know they won’t be able to repay their debts even if they want to. Instead, they’ll sell up their homes or move somewhere cheaper where property values aren’t so high yet! In other words, ‘the market has changed’.

An investor who bought during a bust will generally be able to get their money back if they want out of their investment. Homeowners, meanwhile, may have to sell up if they want out of their home if it’s worth less than what they paid for it or can’t afford the mortgage repayments anymore (especially if interest rates have risen).

Who wins and who loses in a property bust?

In a property boom, the winners are the builders, developers, and homeowners who can then sell their properties at a profit. The losers are those who have bought or built on land that is now worth much less than they paid for it.

A property bust can also be bad news for investors, retirees, and anyone caught with too much debt.

For investors: If you invest in the wrong property, it’s likely to lose value once a bubble bursts. Flippers or renovators who spent a significant amount of money will have a hard time selling their property to gain profit or even recoup the cost. Landlords’ rental income will be affected by the rising vacancy rates as demand slows down due to high prices. Getting caught in a property bust will be hard to recover from.

For retirees: With a pension cover from work or an annuity from previous savings or investments, retirement income is usually guaranteed for life, but not always by law. Property values have fallen so much over recent months that older people may find themselves without enough money left over after paying their mortgages on time each month, meaning they may need to take action now rather than waiting until later — but only if they have enough equity in their homes left over from previous sales prices before buying another one.

Those who borrowed money against their homes can also lose out financially. If someone has debt that is more than the value of their home today, it may be difficult or even impossible for them to pay it off. This could mean losing everything, including personal possessions.


At the end of the day, no one can predict with certainty what will happen to the housing market. Make a calculated decision as you navigate through your options.

Take advantage of the declining prices, but make sure you’re getting a good deal out of it. Cut losses by selling your property, but do so with a sound mind and not because you’re panicking.

If we remember how the property cycle goes, the market will stabilise right after it declines. So as a property owner or investor, this is not the end for you.

There are so many opportunities within the housing market, and it’s only a matter of time before you find one that satisfies your investment goals.

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