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[Podcast] The 7 biggest influencers of our property markets

[Podcast] The 7 biggest influencers of our property markets
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We are now in the cooling-off adjustment phase of the property cycle.

And if you believe most of what the media tells you, it’s all to do with interest rates.

But I don’t agree. My Podcast 395 The Big Factors That Influence Our Property Markets 03

So, to help you understand what’s ahead for our property markets and why the markets won’t crash like some are suggesting, I want to share with you myriad financial, social, and political factors which impact what your family home, or your next investment property, might be worth to show you that it's a lot more than interest rates.

So, what are these factors?

  1. Household formation

With more young adults staying home longer to save hefty house deposits, and the trend to more multi-generational households, or more friends and family members pooling their resources and buying a property to share, the number of dwellings required may decrease a little in the future.

On the other hand, more older Australians are living in one and two people households to even out the numbers.

Another factor affecting our housing markets over the last few years is the myriad of millennials entering family formation age and moving from apartment living into houses in the suburbs.

  1. Demographics

Projections from the Australian Bureau of Statistics estimate that by the end of this decade, our population will be approaching 29 million (1 million less than previously estimated since we closed our borders due to Covid), and there will be almost 40 million Australians by the middle of this century.

That’s virtually adding Melbourne, Sydney, and Brisbane to our population; all these people will need to live somewhere.

It is estimated we will need to build one more dwelling for every three currently existing by then to accommodate them.

And now that our borders are open to overseas migration, more and more will people will want to come and live in the safety of Australia.

  1. Affordability

Affordability encompasses dwelling prices, employment rates, wages, interest rates, credit supply, GDP growth, and inflation – whether someone can afford a property is never just about the price tag attached to the home itself.

Over the last two years, record low-interest rates meant most properties' monthly mortgage repayments were cheaper than ever.

And over this cycle, property values increased by 25 to 30% in many locations, yet wages only increased minimally, meaning we will end up with a two-tier property market.

Investors should avoid blue-collar areas or young family suburbs and seek out suburbs with higher wage growth than the state averages.

These are locations where people can afford and will be prepared to pay a premium to live.

These are often the gentrifying middle ring suburbs of our capital cities.

  1. Credit Policy

Following the macroprudential measures APRA introduced in 2017 and the Royal Commission into the finance sector, we witnessed how the tightening in credit availability spelled the housing boom's end.

The fact is people simply can’t buy properties if they can’t access the cash.

This is a much more important factor in slowing our property markets than rising interest rates.

  1. National wealth, wage growth, and job creation

Interestingly artificial intelligence experts have estimated that anywhere from 20 to 40 per cent of all jobs could be taken over by robots in the future, meaning there will be fewer employment opportunities for unskilled workers or those who perform repetitive tasks.

Many of the jobs that remain could be moved offshore to take advantage of cheaper labour costs, further slashing local jobs. Jobs

This means we will have fewer people doing more productive work.

All of this could impact buyers’ abilities to save deposits, secure finance, and pay mortgages, and in turn, influence house prices.

On the other hand, highly skilled knowledge workers will keep earning more than average and be in the position to buy new homes or upgrade their current homes.

  1. Supply of dwellings

Increasing the supply of dwellings is going to be paramount as our population increases, and to do so, will involve large projects such as high-rise apartment towers and new suburb creation on the outskirts of our cities.

  1. Consumer confidence

The six factors I’ve talked about so far only tell half the story.

Regardless of how readily available credit is or how fast the population is growing, people’s perception of these things is just as important.

If consumers believe the market is heading downward, whether this is reflected by the statistics or not, it will influence their behaviour.

And, of course, people will hold off making significant purchasing decisions like a new home or investment property at times of uncertainty. Consumers

This is the one factor you have some personal control over, and if you’re savvy, you could use it to your advantage to get ahead of the game.

When other buyers are stricken with FOMO and bidding up a storm for less-than-perfect properties, your research could help you stay calm and avoid buying into the hype.

Conversely, when others are paralyzed by fear and bargains abound, your confidence in the advice you’ve received from your buyer’s agent or other professional could see you snap up a fantastic property – without even breaking a sweat.

Links and Resources:

Michael Yardney

If you’re keen to buy your next home or investment property, why not get the team at Metropole to build you a personalized

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Some of our favourite quotes from the show:

“During the recent pandemic, banks eased their lending standards in a move designed to free up credit and to revive the economy. And it worked!” – Michael Yardney

“A year or so ago, it was FOMO, fear of missing out that drove the markets, now it’s fear of buying early that’s driving our markets.” – Michael Yardney

“Whether somebody can or can’t afford to buy a property is never just the price tag on the property itself.” – Michael Yardney


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

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