Australia’s Property Market, Still Safe as Houses

Posted by Jack Guthrie

Over the last 18 months the mood surrounding investment has been gloomy and any mention of market consolidation has been marred with pessimism and doubt. However, a noticeable line of optimism is starting to ring throughout our national market. Both economically and culturally, we are a lucky country and investors are starting to remember that.

Anyone who attempts to categorise the ‘Australian property market’ as a whole is engaged in a fallacy. Our markets and their performance are as varied as the residents who inhabit them, which is why our research will recommend certain areas over others at different times. But there are some overarching trends that will contribute to improved sentiment and property performance nationwide.

Record Low Cash Rate

As of June 3^rd, the RBA dropped the cash rate to a historic low, resulting in cash and term deposits becoming far less attractive. This promotes a switch from cash into growth assets. Cash rates were lowered to an all time low of 1% – a move that will likely see major lenders pass on cuts to borrowers over the short term. This acts as a major plus for investors, with more credit available to ready buyers.

Constrained Supply Levels

A combination of increasingly prudent lending, rising construction costs and dampened investor demand has seen a significant shift in the level of oncoming supply throughout our major cities. Reports from prominent industry figure JLL indicate that the number of apartments marketed across six capital cities fell 48%, over the 12 months to March 2019.

Improved Affordability

A byproduct of our eastern seaboards recent movements, the improvement in affordability ties in closely with recent housing market performance. National house prices (according to CoreLogic) are about 8% below the peak levels achieved in July 2017. With capital city markets varying from a 0.5% fall for Adelaide, to a 19% fall for Perth. These lowered entry prices will aid first home buyers and investors alike, as they seek lowered price points for entry into respective markets.

Political Certainty

Certainty around our federal government will give increased confidence to the business community and property investors in particular. We may well see the ‘herd mentality’ in action, with a surge of confidence helping stimulate continued investment over the next three to five years. Similar to the consumer confidence drops that were experienced in the lead up to the election, the adverse effect can be a key driver for an up swinging housing market.

Ultimately, the juggernaut of the Australian property market will continue to roll on. While sentimental factors have managed to generate short term impacts on selected major markets, the appeal of our cities remains constant. The growing ground swell of confidence and market dynamics will aid in driving the national market over the midterm. At Blue Wealth it is our aim to provide our clients with the opportunity to leverage off these factors now and in the future.

Posted by Jack Guthrie, on 16th Jul 2019