Australian house price forecasts.
In the medium term, property values will be linked to the extent that our economic recovery affects income, employment, borrowing capacity and credit availability.
And underlying long-term fundamentals support our property markets in the medium to long term.
So let’s look at a couple of them…
- Population growth
In the short-term population growth may fall, but this should increase again now that the gates have been opened and over 200,000 overseas immigrants will be allowed to come to our shores.
Of course, Australia is likely to be seen as one of the safe havens in the world moving forward.
- Declining housing supply
The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.
Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.
- Interest rates are low
The prevailing low-interest-rate environment is making it easier to own a home, either as an owner-occupier or investor.
In fact, it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.
- Smaller households are becoming the norm
Sure many people live in a multigenerational household, but pretty soon Millennials will make up one-third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.
More one and two people households mean that moving forward, we will need more dwellings for the same number of people.
- More renters
Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.
The government isn’t providing accommodation for these people. That’s up to you and me as property investors.
- Investors are back in the market with a vengeance
- The underlying economic fundamentals are strong
- And Australia’s banking system is strong, stable, and sound
Even though a few home buyers have overcommitted themselves financially, there should be no real concern about household debt because, in general, it is in the hands of those who can afford it.
There is currently a very low rate of mortgage default.