Your Property Market Health Check

The dramatic headlines are back!

All we hear is one catastrophe after another… interest rates going up, cost of living pressures, stock market crashes, vacancy rates for rentals are ultra-low and rents are rising. Is the prognosis for the Australian property market all doom and gloom?

No one has a crystal ball about what property prices will be in the next year, but here is a quick health check of the Australian property market:

• There are still high levels of price growth in selected areas after a few years of universal growth across all national markets.
• Adelaide is positioned around some of Australia’s three fastest-growing employment industries and is well-positioned to generate and manage population growth.
• SE Queensland will continue to grow – the Brisbane median house price is currently 61 per cent of the Sydney median house price, whereas, in 2008, it was 78 per cent (which indicates there is still some good room for growth).
• Overseas migration is increasing and is estimated to be around 200,000 people a year, driving demand for housing and adding pressure to ultra-low vacancy rates.

At Triple Zero Property, we still see the property market growing in SE Queensland and Adelaide (driven by supply and demand), however the speed of growth is not as aggressive. It is like the property market has moved from fifth gear down to third!

Hurting

The construction industry is facing challenging times with labour market shortages and disruption to supply chains causing costs to rise. Russ Stephens, the co-founder of the Association of Professional Builders, has estimated around 50 per cent of Australian building companies are currently trading insolvent – which means they can’t pay their bills… ouch!

Healthy

At Triple Zero Property, we still see the property market growing in SE Queensland and Adelaide (driven by supply and demand), however the speed of growth is not as aggressive. It is like the property market has moved from fifth gear down to third!

Harmful?

But wait, what about rising interest rates? Historically, increased interest rates don’t correlate well with a negative impact on property prices, but it does lower economic activity such as property sales. Further predicted rate rises may stop some owner-occupiers from entering the market due to fear, uncertainty, or inability due to financial constraints. This will most likely put further pressure on an already tight rental market.

If you already have a mortgage, now is a good time to relook at your rates – financial institutions are still very keen to attract new customers, so talk to your broker or financier.

Staying fit & healthy requires commitment

Each generation has their own challenges with the housing market. Most of us reading this didn’t have a mortgage in the late 1980’s when interest rates were 17%. I remember as a teenager in suburban Adelaide our house didn’t have any carpet until Mum and Dad saved up enough to afford it!

Today house prices are high because interest rates are low – even if this is a rather simplistic way of looking at things. Over the next few years, I still see opportunities for first home buyers and investors, especially in building new.