What drives property price growth?
That’s what I’m going to discuss in today’s episode.
Then I’m going to have a chat with Kate Forbes about the surging population growth in Melbourne.
Melbourne is likely already Australia’s largest capital city.
That doesn’t mean you can invest just anywhere in Melbourne, but we’re going to give you some ideas of what to look for when you’re considering where you should be investing.
What drives property price growth?
Some people say that supply and demand drive price growth.
But in my mind, that’s too simplistic.
There’s more to it than that.
Let’s take a look at the macro effects that drive the general property markets.
- Household formation: This is how many new households are being formed and the demographics of those households.
- Land component: Not all land is created equal. Some land is more valuable than other land. It doesn’t matter if there’s a property on the land – you need to look at the land-to-asset ratio
- Affordability: This doesn’t mean cheap property. Affordability refers to the flow of money – interest rates and money supply.
- The economy: The economy creates jobs, and jobs create people who can afford to buy homes and upgrade homes.
- Market sentiment: How people feel about the market. Worries about the market cause potential buyers to sit on the sidelines.
- Past performance: Recent past performance isn’t as important, but long-term past performance can tell you what future performance will likely look like.
- The returns: What sort of capital growth, rental incomes or alternative investments you can get.
- The X factor: Unexpected events that drive our markets.
Is Melbourne already Australia’s biggest capital city?
The latest forecast suggests that Melbourne’s population is going to overtake Sydney’s sooner rather than later. But maybe this has already happened.
How is this possible?
There are different definitions of what the boundaries of the capital cities are. Some definitions include the Central Coast in the Sydney population count, but leave Geelong out of Melbourne’s population count.
Remove the Central Coast, and then Melbourne already has a higher population than Sydney.
Even with the given definitions, though, Melbourne is on the way to having more people than Sydney by 2026.
Why has Melbourne done so well? There are a few reasons:
- It’s consistently rated one of the most livable cities
- It’s had significant economic growth, which means more jobs
- It’s one of the more affordable cities
Links and Resources:
Kate Forbes – National Director – Property Strategy at Metropole
Organize a time to speak with Kate Forbes or her team at Metropole by clicking here
Some of our favourite quotes from the show:
“When fear or greed comes into the market, when investors come into the market, we get these big swings.” – Michael Yardney
“If you fast-forward four years, Melbourne’s population is going to increase about 10%” – Michael Yardney
“Buy the best property you can afford. No question about that.” – Michael Yardney
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