The ascending rise in value has led many to believe that the Australian property market is a bubble waiting to burst. Is this true – and is now a good time to invest in property? ORM shines a light on the property market.
It has long been the case that the Australian dollar and economy have been strong performers on the global stage. As a country rich in natural resources and popular in terms of investor interest, there is great potential for Australians to enjoy economic growth and prosperity for the foreseeable future.
The Australian property market has also undergone significant growth in recent years, leading to some people viewing it as a potential bubble. With the economy currently performing well, and property prices having been consistently rising for so many years, many people are wondering whether now is a good time to invest in real estate. Here are some factors to consider.
Australia’s economy is undoubtedly one of its strongest assets, and it is fair to say that most Australians will be feeling the benefits of cheaper imports and investment opportunities which present themselves in such times of prosperity.
With the knowledge that the economy is strong and the fact that house prices have been rising for such an extended period of time, many Australians will be thinking about getting their foot on the property ladder/investing in a property. The fact that foreign investors could be increasingly priced out of the market due to the surge in the Australian dollar will further bolster domestic confidence in the property market.
More than ten per cent of all new housing in Australia was purchased by foreign investors in the first quarter of 2017, showing just how lucrative the property market is seen to be. This has created competition for the average Australian looking to invest in the property market, and contributed towards the demand, which has caused prices to rise so significantly.
There are, of course, more popular areas than others for property investment, with Sydney unsurprisingly containing some of the most expensive (and potentially overpriced) properties. The possibilities for investment are greater in those areas, which have seen a slowdown or shrinkage in property growth, such as Darwin (down 6.8 per cent).
One of the biggest obstacles to first time buyers is the large deposit they must pay in order to secure a mortgage. With property prices rising so fast, the amount of money they must accumulate for a loan is also rising at an alarming rate, causing concern over the current and future affordability of Australian housing.
Despite attempts of regulators to curb property borrowing and unaffordability, demand for loans still remains strong and investors still have a keen interest in buying up more property. There are, however, first-time buyer incentives due to be introduced soon, which could help those struggling to make their way into the pricey property market.
Home as an Investment
Unlike investment options such as trading forex, which involve buying and selling off assets incredibly quickly, property investment is usually viewed as far more long term, with fairly steady and predictable increases/decreases in value. As an investment, therefore, property is far easier to manage, and could prove to be very profitable in the long run. Those with enough capital to invest in multiple properties certainly stand a good chance of having their assets rise in value if the current trend continues.
The exponential rise in value has led many to believe that the Australian property market is a bubble waiting to burst. Only time will tell if this turns out to be true or not, and much of it depends on how swiftly and effectively banks and lenders deal with unaffordability for first time buyers and investors.
With such levels of demand, which currently exist, however, it is hard to see how property will crash significantly, or to the extent that it becomes easily affordable for first time buyers. The market is slowing down, though so wage growth may have some time to catch up in the future. Whether buying property now is a good/feasible idea or not really depends on which group you belong to. Investors with sufficient capital are sure to see the market as a lucrative place where they can make a steady and fairly easy (but not necessarily guaranteed) profit, whereas first time buyers really do have it tough due to the swift increases in property value.
About the author
Luke Hatkinson-Kent worked as a Financial Analyst in London after graduating in Economics from the University of Manchester. Taking this experience and mixing in his passion for journalism, Luke has gone on to work for himself, writing freelance financial news pieces. He has produced detailed reports on stock market movements as well as financial current affairs articles for a number of high profile online publications. Contact Luke via Luke.HatkinsonKent1@gmail.com.