Looking to invest in property? Some words of caution.

Supply / Demand Forces Also Apply in the Property Market

Tim Lawless from Core Logic RP Data has written an excellent article showing how the long awaited property development boom may lead to a potential oversupply of certain types of dwelling in some markets.  For example he notes that 41% of the building approvals in the inner Sydney region are concentrated in the Waterloo-Beaconsfield area.  Most of these will be multi-unit developments.

You can read Tim's full article here

The ABC's economic commentator, Michael Janda also notes that, in spite of the prevailing myth, property prices do not always rise.

The above house in Port Hedland, WA was purchased for $1.3M in 2011. (Photo:  Jan Ford Real Estate)

During the weekend it passed in at auction with a highest bid of $360,000.  One can only hope that the original investor has not been stranded with finance at 80% of their purchase price of $1.3M.  Be very careful about investing in one industry or boom towns.  The cycle can turn severely in both directions.