The constant debate about whether there is a bubble in the local housing market and if it has burst consistently fails to take into account the long term performance of the real estate market.
Some commentators, often with an air of expectation who use statistics to suggest an imminent collapse, need to take a longer-term view and look beyond what happened in the market last weekend or last month.
Like any broad-based market reliant upon the participation of thousands of people each week, it will be bound to fluctuate over the short term, but due to most households wealth being in housing and the fact that most people only buy and sell infrequently, what really matters is the medium to long term performance.
A review of the performance of the market over the past decade indicates that the only time that prices fell significantly was during the Global financial crisis, the reasons for the drop of around $70,000 in the median house price between 2008 and 2009 are well known and home owners and investors should be pleased that once local economic conditions improved so, too, did the market.
The alternative would not be welcomed by anyone. In the same way, as rapid increases in value are unsustainable and ultimately not positive for the economy so, too, are substantial falls.
If prices fell strongly and remained low then many home owners and investors would face the scenario of negative equity, increases in mortgagee sales and investors leaving the market.
There is no doubt the residential market is different now to what it was last year with lower price growth expected and less transactions undertaken, however it does present opportunities for those who are in a position to buy.
A review of the residential market which each year in Victoria turns over approximately $70 billion from about 150,000 transactions will show that is based on solid fundamentals and has provided reasonable capital growth over the last decade.