20% UP? Or will these things slow property prices...
Westpac, one of Australia's 'BIG FOUR' banks has weighed in on the property price argument calling for a 20% increase in residential dwelling values nationally over the next 2 years.
Please do err on the side of caution of course as many notable economists and housing specialists were expecting a dramatic pullback only this time last year.
However, there is absolutely no denying there has been an incredible verve in the housing market and surging house prices, this strength has been reported almost unilaterally.
Short-term
Economics at its core is based on the balance between demand and supply, although there were murmurs of a slightly quieter weekend (perhaps linked to the horrendous weather, some buyer fatigue, and approaching Easter), it has been clear that the demand for property has heavily outweighed supply which has caused major upward pressure on prices.
This demand has been fuelled by many reasons but perhaps the most prevalent is the lower rates and more relaxed lending criteria making it is easier to borrow the cheapest money the global financial systems (Australia being one of them) have ever offered, in history.
Homebuilder grants have brought new demand into the market that would not have been there had this not been introduced.
There is a myriad of other financial incentives, such as relaxation of early super release now accepted for home deposits working as sugar-like hits to fuel buyer demand but what about supply, if demand is higher, what about the supply?
In a word - Tight.
Our nearest capital market to the Gold Coast is Brisbane and it is reported that supply across the region of houses for sale was down 16% over the 12 months prior, whilst sales had increased by 4%.
Less available, more sold = seller's market.
Now, this is great news for those that own their homes and are seeking a profit, but it makes things hard for those homeowners who are looking to downsize, as they have a fear of selling and having nowhere to go, and those who are looking to enter into the market, especially those looking to relocate who are both ready and willing to buy but can't.
Medium-term: what can stop this?
Unemployment and underemployment - currently combined at 20%+
Lack of immigration
Overbuilding - driven mainly by Homebuilder stimulus
The decrease in birth-rate, the Covid Baby joke is not actually backed by statistics as birth rates historically decrease in financially uncertain times.
Potential oversupply, when demand outstrips supply there is often a rebalancing that can lead to swings in the opposite direction ergo those looking for a premium price and a quick sale will start coming to market. The effect will be a widening of the menu for buyers combined with many buyers leaving the market due to successful purchases or other reasons, the supply/demand equation may tilt the other way.
Limited wage growth
Rising costs - such as the increase in mandatory Super contributions to 10% this year.
The economic impact of these drivers could work as dampeners to the current high-octane buyer demand that is in the market.
Australia already has a relative imbalance between the levels of household incomes and the prices of primary properties, certain factors could compound this to then become a problem in the not-so-distant future.
If you would like to discuss any of these points further or just find out where your property sits in today's market, please contact us today.
