Is the Australian property market really falling apart?
The danger of an impending Australian property market meltdown was a key financial topic last year. Despite various reports that suggest that the local housing market is geared towards downfall, there is now more support that such predictions may be inflated.
In Perth, it is reported that the economy is seeing a re-haul, with increasing jobs and development projects restoring the property market and in Brisbane, first-time home buying and investment is looking favourable with more affordable suburbs emerging. The property pricing boom in Melbourne and Sydney has since been under control with the implementation of state policies that help to regulate the economy – in particular, house prices and the debt landscape. The Australian Prudential Authority (APA) have put in stricter policies in place and clamped down on lending limits but it has also been observed that prices are experiencing slow growth.
Last year, there were worries of escalating interest rates but experts are now forecasting that interest rates will remain stable through the year. In turn, housing prices are likely to gradually grow. Despite previous reports of a diminishing market state, most properties in Australia are being sold at a profit.
In the worst-case scenario of properties falling 10-15% in value, it is not necessary to resort to selling as the rents remain the same. The key is to maintain a patient and systematic approach. The bottom line is that it is normal for the Australian property market to have its ups and downs and a negative deviation does not confirm a crash in the future. In the long-term, property prices will rise and whether you choose to sell yours during a period of poor growth depends on a combination of your plans (For example, if you are an owner-occupier who is certain about keeping their home for many years, you can probably rest easy and not have to worry about selling. On the other hand, if you are an investor, you may conclude that selling at a loss now would offset overall deficits) and market research.
New buyers, however, may face complications if they paid the 10% and are unable to make up the shortfall. This can be dealt with through personal loans and other courses of action, but it is best to exercise tighter control over offerings in the future. For instance, if you can afford a $500,000 property, we may advice you to restrict the amount to $450,000 for investing. This also serves to create a financial reserve that protects you against unforeseen conditions such as emergency repairs and an inability to make repayments.
Better yet, we can choose to direct the money into safer places like Bendigo where vacancies are low and growth in population and industry is high. By continuing to focus on positively geared property in areas of consistent population growth, we can protect our clients from many issues that might ensue.
Still, the views of economists and property managers regarding the future of the Australian property market have not reached a consensus. The inconsistent information that comes from self-research can be confusing and at its worst, get you stuck in an inactive rut or encourage poor financial decisions. It is important to consult an expert on the local market, and be picky about whose services you decide to engage.
If you are thinking of investing in Australian property and need informed, specialised advice on how to purchase and strategise your portfolio, get in touch with us today by calling 1300 359 245 or dropping us a message here.