Are we in a Property Bubble

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Interesting Article from Alex Lee of Ark Total Wealth 
This would have to be one of the most debated financial topics at the moment, with every 'expert' from around the globe having their say.

Using facts, theories, gut instinct or economics you could mount a strong argument for either side. The following articles provide an interesting insight into some of the alternative views by respected commentators and economists.

Treasury Secretary John Fraser warns Sydney is 'unequivocally' in a housing bubble. 

ANZ's Chief Mike Smith doesn't believe we are in a housing bubble but we could be heading that way if we aren't careful. 

ABC's Alan Kohler writes that we are not in a bubble, but merely watching market forces taking place which means we may have over-valued property for a considerable amount of time. 

Domain executive editor, Stephen Nicholls has analysed the doomsday experts in his article today on Domain. 

Every expert will have their own opinion - what we believe is important is making efficient use of your resources, and managing risk regardless of the prevailing economic conditions.

To get you thinking, here are some ideas on that you can be doing right now;

1. Take advantage of the low interest rate environment - If you are a property owner, and hold debt, then almost certainly in the past you have been making repayments at a higher rate of interest. What are you doing with your extra cash flow? A low interest rate environment is a great opportunity for you to pay down additional debt to get ahead for when interest rates eventually increase.

In addition to making extra repayments, if you are worried about your cash flow moving forward now might also be a good time to fix your interest rates. There are a selection of lenders whose fixed interest rates are currently lower than their variable rates. This may be an additional opportunity to create some extra cash flow which can be used to repay debt or invest.

2. Be strategic on which lender you use - Whether we believe the property market is overheating or not, banks are being forced by APRA to tighten their lending - this means increasing their interest rates on investment properties and lowering acceptable loan to value ratio's. This tightening has created quite a large differential between lenders which means it is important to shop around to find the right loan for you. We have mentioned it before, but while a low interest rate is important it's also just as important to understand which product has the features and benefits that suit your specific situation.

3. Build your buffers - Property is a long term investment - it is not about picking the absolute bottom or selling at the top it is your ability to be able to hold the investment through good and bad times. To do this, you need to put in place the appropriate buffers to help you should times get tough. For example, do you have the following in place;

- 6 months' of interest payments in cash to get you through any cash flow shortfalls
- Income Protection to ensure you have a replacement income should you not be able to work due to injury, illness or sickness

We are not experts in picking the property cycle, however we strongly believe that regardless of what the market is doing there are strategies you can put in place to put yourself in a better position. If you have any questions, please don't hesitate to contact us on or visit our website for more information.