Today I have read a variety of articles about predictions about the Australian residential property market. It’s a circus with everyone putting their 2 cents worth in. As a result I thought I would try to make sense of it for the unfortunate average property buyer who doesn’t know, understand or even care about economic indicators or anything economists or the Reserve Bank are saying.
APRA (our regulator of financial things) says everything is fine. They’re not worried about property. It has the powers to make banks change their lending policies to slow down property investment but hasn’t had to used them. Simply looking over the banks’ shoulder has encouraged them to set their own tighter lending policies so Big Brother doesn’t have to force it upon them.
Our treasurer Joe Hockey is not concerned by property prices and actually makes sense in saying that a fall in property prices can only happen when there is an oversupply. Australia is a long, long way from an oversupply of property and he is actually encouraging building of new homes because there’s so much demand (and it provides jobs).
Tony Abbott owns property in Sydney so he said, “I do hope our housing prices are increasing.” He later added , “….modestly increasing.”
With Sydney up 39.3% and Melbourne up 22.4% in the last 3 years, something will change as that is not sustainable. Remember there were many years of flat prices running up to 2012 so the Sydney property boom includes a lot of catch up.
The OECD, which a world economic body based in Paris, yesterday said it thinks Australia’s property market is about to collapse. However, most of the world has a very different view of property to Australians. We hold it very dear to our hearts and if money gets tight we will generally stop eating so we can pay the mortgage. Others don’t see it this way so I always take very little notice of what the rest of the world thinks on this topic. What works for us here may not work overseas but that’s the way it is. They don’t get us. After all – we’re Aussies!
The Reserve Bank thinks Sydney and parts of the Melbourne market are overheated and “resembling a feeding frenzy”. As a result they do not want to drop interest rates below the current 2%. I tend to agree and can recall the same situation in 1989 when a property boom was in full swing. It now seems likely that we will have low interest rates for the next 1 to 2 years before they start to rise back up to a more normal level of about 5%. Make sure you can afford a 3% rate increase when you’re buying property. That’s an extra $750 per month on a $300,000 loan (tax deductions aside). Rental increases will help but it’s always a good idea to have a safety buffer of at least $10,000 up your sleeve. We discuss that with all our buyers at Investment Property HQ as it gives you security and peace of mind.
A Darwin agent says Darwin property prices have fallen as far as they’re going to (up to 10 or 12% over the past year) while a leading data company’s figures suggest only a 2% fall has occurred. In any case Darwin is very quiet. We’re watching to see any sign or recovery.
John McGrath says of the Sydney market, “I hope it’s topped out or else we are all going to have issues.” He added at this week’s Australasia Real Estate Conference, “SE Qld is my top pick of everywhere to buy in Australasia…” He’s making sense. Experience tells me the wave of price growth hits Brisbane 2 years after Sydney and then the Sunshine Coast another 6 months later. That’s now!
House and unit prices are just on the rise in SE Qld and if ever there was an opportunity to buy in at the right time, it is right now!
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