Population growth continues to drive property prices up despite coronavirus fears
Based on the current interest rate of 0.25 per cent, it should be time to consider building a property portfolio, upgrading your home or becoming a first home buyer.
Consumer economics have been further improved by oil prices plummeting: petrol prices are falling and heating bills could be next as we head into colder months.
That means more leverage if you are looking to enter the property market and can afford to do so in the current climate.
The Australian property market is currently a hot one.
The property market is similar to the stock market in a way, in that the most successful investors take a long term approach.
However while there is panic buying in the stock market due to the coronavirus, there is certainly no need for it in the property market as it takes a lot longer for home prices to feel the impact, if they feel the impact at all.
Before the virus shut down the country, bidding wars were back. Despite the current change in landscape, it is still difficult to find homes selling for less than the list price: the move to online auctions seems yet to have affected sales prices.
The other facet to consider is demand outstripping supply. More demand equals higher prices. Demand could fall if the coronavirus causes a recession leading to mass job losses and economic uncertainty.
Yet, what we have seen thus far is central banks lowering interest rates to keep demand ticking over.
Australia’s property market is also well placed due to population growth.
The following table illustrates consistent growth over the last 30 years:
Coronavirus is helping to push interest rates down, while demand (at this stage of the pandemic) continues to increase. It’s a perfect storm for property buyers and home owners.
In essence, Australia continues to have one of the fastest-growing populations in the developed world and it is having an impact on both housing stocks and prices.
Sydney is growing strongly, with an annual return of 10.9 per cent growth on median house prices. CoreLogic shows migration has helped contribute to a 4.1 per cent increase in annual dwelling values in the ACT, weak population growth has seen the Northern Territory’s capital falling by 7.8 per cent in dwelling values over the last 12 months, Brisbane has seen steady growth of 1.9 per cent, reflecting steady migration numbers, strong population growth is driving the Hobart market, which has increased by 5 per cent for the year and helping Melbourne grow by 10.7 per cent, South Australia remains stable despite little migration and Western Australia is yet to benefit from net migration, with house prices falling by 4 per cent for the year.
Doron Peleg of RiskWise says, “Sydney and Melbourne’s population growth, job creation, improving economy and infrastructure will draw even more people to these cities and further drive up property demand.”
In other words, the market has recovered and remains healthy.
What people should look out for in this climate is what they can afford if a recession hits and they lose your job.
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This article is general news and information. This article is not financial advice.
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