Newton’s Third Law of Motion and the Property Market

8/10/2018

It turns out that Isaac Newton was a better physicist than he was an investor. Newton lost a fortune-around £20,000-in one of history’s most notorious market collapses, the South Sea bubble, when the South Sea company collapsed in 1720 (that’s the equivalent of about £7,500,000 in today’s money. Ouch!)

If only he applied his revolutionary theories on gravity, to investment markets.

Newtons Third Law of Motion - for every action, there is an equal but opposite reaction.

Australian real estate (or is that more just Sydney and Melbourne) now appear to be succumbing to Newton’s third law.

What goes up, must come down.

Sydney and Melbourne’s property price declines seem to be accelerating, which has sparked a flurry of warnings of impending doom. Some say falls of up to 40% are possible.

Others say Australia’s property bubble is just a media circus. A ploy to attract viewers and readers, rather than reality.

Or is it just an orderly correction, delivering what many people were demanding-lower property prices?

So, the question is, will the housing bubble slowly deflate or burst with a loud bang?

I’d be very interested in your thoughts and why you think that way (of course we know the main purpose of property predictions- to make meteorologists look respectable!!).

Property is after all Australia’s favourite investment and the ramifications of a serious decline in housing have consequences for us all .

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Peter

8/10/2018 03:44:32 pm

Hi Tony, I think the correction has a bit to go yet. A Shorten Government fiddling with both negative gearing and capital gains tax will spook investors even further. Outcomes of the Royal Commission will be higher interest rates and tighter credit - all head winds for property prices. I should be careful what I wish for. I was one of those that thought prices should fall - not so sure now!!

Tony (Author)

8/10/2018 04:38:38 pm

Thanks for your comments Peter. The short-term direction is anyone's guess, but I wonder if stagnant prices will be the new normal for quite some time. Will a combination of low wages growth, rising interest rates and tighter lending practices create a new reality?

Peter

9/10/2018 10:13:34 am

Tony, there is a correction under way but I still think in the long-term, property will be the go to investment for most people.

Hassa

9/10/2018 11:03:01 am

Hey Gritty, Hassa here. I think it depends where you are. Here in Darwin property has already fallen by 20% but I see in places like Tassie it’s been increasing strongly

Tony (Author)

9/10/2018 11:16:32 am

Spot on Hassa. There might be a housing affordability crisis in Sydney and Melbourne, not in Darwin by the sound, or in most of regional Australia. Where do you think Darwin property is heading and why?

Hassa

9/10/2018 11:35:29 am

I reckon it will keep falling. There’s just not enough work around and people are leaving town. Rents seem to be holding up but not sure for how long.

Kaye

10/10/2018 02:28:09 pm

We have owned several properties in SEQ for over 10 years now and haven’t seen a huge amount of growth. So I think I might come back a bit here but nothing like Sydney and Brisbane

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Newton’s Third Law of Motion and the Property Market

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