Do you know the term property bubble has been discussed since 2001 when the term was coined and since then, there has not been a property bubble burst here in Australia. The fact is simple, is comes down to many factors but the one that we really need to put most of our focus on in supply and demand.
Here are some facts from the Australian Bureau of Statistics
- In 2015-16, net overseas migration (NOM) reflected an annual gain of 182,165 persons, 3.0 per cent (5,300) more than in 2014-15.
- An estimated 366,400 people moved interstate in 2015-16, an increase of 8.1 per cent from the previous year.
- At 30 June 2016, 28.5 per cent of Australia’s estimated resident population (6.9 million people) was born overseas.
Here we can see just in NSW alone, there is a net migration of 59,812 into the state. What is interesting is that residents in NSW are migrating to other states like VIC and QLD due to more affordable living and lifestyle choices. Still there is nearly 1400 migrants coming into Sydney on a weekly basis.
What is interesting is that VIC and QLD has experienced the largest interstate migration compared to all other major capital cities. It is projected that VIC will have the highest population in 2050. QLD has experienced a healthy growth at nearly 12,000 growth in interstate migration.
Housing supply in most major capital cities are failing to provide enough affordable options to manage Australia’s housing demand crisis as according to a report from the Australian and Urban Research Institute.
The report shows that Sydney for example is not able to keep up with the population growth rates and there is a great need for more housing to provide for the influx of population growth both interstate and overseas migration.
What we are seeing is a blown out of house prices due to the increase demand from overseas migrants and old money for investments and now the market is correcting itself. So although there is a lot to do with high house prices, there is a very strong demand from first home buyers and new investors.
One factor that’s affecting the cooling in the market is that financial institutions are now not just considering lending from a Loan to Value Ratio of the property, they are not putting a lot more emphasis on the Loan to Income Ratio. This means, you will now need to be able to service the loan very comfortably with your current budget.
There is no doubt that investor lending has cooled down as well and the number of interest only loans being approved, but this has been happening for the last two years.
There are still plenty of buyers (investors, first home buyers and home owners) and demand in the marketplace and it is up to us to make sure we vigilant to pick properties in location and areas that stand the test of time.
We all know that negative stories and fear creates a sensational headline, but it does not always reflect the current market conditions and state of properties. The main focus is to take a long term approach so you are not affected by what gets sensationalise and to not panic and remain calm.
One of the keys to investment success is to buy counter-cyclically, which is when the market is softer because there are great deals out there as there are fewer buyers and sellers are willing to negotiate. Everyone still needs accommodation and the banks still need to lend money to make money. What you really need to focus on is to de disciplined and You just need to make sure you have a sound investment strategy.
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