AMP warns of property bust

AMP says that the good times are over for property investors, even though they may not realise it yet. The dramatic price rises over the past few years are not sustainable, says AMP's Shane Oliver, head of investment strategy, and it's a question of whether prices are actually going to fall or just remain stable. Mr Oliver says that a property “price bubble” is forming, much like the technology bubble of the late 1990s which burst in March 2000.

As with all price bubbles the people who buy in last are the ones who will lose the most. Conditions may be right now to sell, as price rises have gone or are going, said Mr Oliver.

Housing price bubbles are a regular phenomenon, with one occurring every ten years or so. While past booms have not generally ended with price falls in nominal terms, Mr Oliver stated, in real terms – that is, after inflation – they always fall. The good news though is that a collapse is unlikely this time round, as this would require a recession and the Reserve Bank is striving to avoid that. But falls in prices are probable in some areas, he said, with Sydney and Melbourne the cities most at risk. And the longer the price bubble goes on the harder the fall will be when it bursts.

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