{"id":1334,"date":"2021-12-26T11:10:44","date_gmt":"2021-12-26T11:10:44","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/property-updatethe-7-biggest-influencers-of-our-property-markets\/"},"modified":"2021-12-26T11:10:44","modified_gmt":"2021-12-26T11:10:44","slug":"property-updatethe-7-biggest-influencers-of-our-property-markets","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/property-updatethe-7-biggest-influencers-of-our-property-markets\/","title":{"rendered":"Property UpdateThe 7 biggest influencers of our property markets"},"content":{"rendered":"

[ad_1]
\n<\/p>\n

\n
\n

Please use the menu below to navigate to any article section:<\/p>\n<\/div>\n

Regardless of the economy, cycle, or market conditions, property is always<\/em> a hot topic of conversation.<\/strong><\/p>\n

\"EconomyAnd with our housing markets having delivered staggering growth over the last couple of years people love talking about interest rates, price growth<\/a>, price declines, auction strategies, and house prices in every corner of Australia.<\/p>\n

They talk about it as though it\u2019s in a league of its own, but this couldn\u2019t be further from the truth.<\/p>\n

The reality is, the property market isn\u2019t an independent sector of the economy.<\/p>\n

Rather, it\u2019s inextricably linked to a myriad of other financial, social, and political factors, all of which impact what your family home, or your next investment property, might be worth.<\/p>\n

So, what are these factors?<\/p>\n

1. Household formation<\/span><\/h2>\n

This oft-overlooked factor is actually more important than overall population growth<\/a>\u00a0because what increases the demand for housing isn\u2019t the number of people living in a city (or country), but the number of dwellings needed to accommodate them.<\/p>\n

This works in a number of ways\u2026<\/p>\n

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, it\u2019s possible the number of dwellings required may decrease a little.<\/p>\n

On the other hand, there are more older Australians living in one and two people households to even out the numbers.<\/p>\n

Another factor affecting our housing markets over the last few is the myriad of millennials entering house family formation age moving from apartment living into houses in the suburbs.<\/p>\n

2. Demographics<\/span><\/h2>\n

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 50 million Australians by the 2060s. <\/p>\n

That\u2019s virtually doubling our population in the next 40 to 50 years and all these people will need to live somewhere.<\/p>\n

It\u2019s likely that now that we\u2019re moving into a Covid normal life our borders will open meaning more and more will people will want to come and live in the safety of Australia.<\/p>\n

Then factor in our current population\u2019s penchant for knocking down existing dwellings and rebuilding, and it looks like we\u2019ll require around 200,000 new dwellings every single year.<\/p>\n

The question many investors ask themselves is, where will those new dwellings and the associated population growth and infrastructure spending \u2013 be?<\/p>\n

That\u2019s not necessarily the right question.<\/p>\n

The population growth corridors of our cities tend to be poor capital growth locations.<\/p>\n

Abundant new supply is the enemy of capital growth.<\/p>\n

At the same time these locations tend to be where new families and migrants move, and this demographic, which tends to have a little spare cash left at the end of the month, are areas where there is little ability to push up the value of properties \u2013 these are not high wage-earning areas.<\/p>\n

3. Affordability<\/span><\/h2>\n

Affordability<\/a> encompasses dwelling prices, along with employment rates, wages,\u00a0 interest rates, credit supply, GDP growth, and inflation \u2013 whether or not someone can afford to buy a property is never just about the price tag attached to the home itself.<\/p>\n

\"HousingOver the last two years, record low-interest rates meant the monthly mortgage repayments for most properties were cheaper than they\u2019ve ever been.<\/p>\n

Over this cycle property values are likely to increase 25 to 30% yet wages will only increase minimally, meaning we are going to end up with a two-tier property market.<\/p>\n

The more highly skilled and highly paid workers will be able to afford to pay more for their homes, while the average working-class Australians won\u2019t have more money in their pockets to pay another $1- $200,000 for their homes.<\/p>\n

In other words, investors should avoid blue-collar areas or young family suburbs and seek out suburbs where wages growth is higher than the state averages.<\/p>\n

These are locations where people can afford to and will be prepared to, pay a premium to live.<\/p>\n

These are often the gentrifying middle ring suburbs of our capital cities.<\/p>\n

4. Credit policy<\/span><\/h2>\n

\"Percentage,Property investment is a game of finance, with some houses thrown in the middle.<\/p>\n

Over the past few years, we\u2019ve seen the significant impact changes in credit policy can have on our property markets.<\/p>\n

Following the macroprudential measures APRA<\/a> introduced in 2017, and the Royal Commission into the finance sector, we witnessed how the tightening in the availability of credit spelled the end of the housing boom.<\/p>\n

The fact is, people simply can\u2019t buy properties if they can\u2019t access the cash.<\/p>\n

And while interest rates are unlikely to rise in the next little while, APRA<\/a> is likely to interfere to try and slow down our property markets.<\/p>\n

5. National wealth, wage growth, and job creation<\/span><\/h2>\n

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.<\/p>\n

\"Jobs\"Of the jobs that remain, many could be moved offshore to take advantage of cheaper labour costs, further slashing local jobs.<\/p>\n

This means we will have fewer people doing more productive work.<\/p>\n

All of this could impact buyers\u2019 abilities to save deposits, secure finance, and pay mortgages, and in turn, influence house prices.<\/p>\n

6. Supply of dwellings<\/span><\/h2>\n

As I\u2019ve already explained, increasing the supply of dwellings<\/a> 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.<\/p>\n

But clearing the land and knocking up some houses depends on council zoning, density regulations, transport links, and other essential infrastructure \u2013 people won\u2019t buy a house and land package 40km from the CBD if they can\u2019t get into work, or if local schools, shops, and medical facilities are lacking.<\/p>\n

7. Consumer confidence<\/span><\/h2>\n

The six factors I\u2019ve talked about so far only tell half the story.<\/p>\n

\"CrowdRegardless of how readily available credit is, or how fast the population is actually growing, people\u2019s perception of these things is just as important.<\/p>\n

If consumers believe the market is heading downward, whether this is reflected by the statistics or not, it will influence their behaviour.<\/p>\n

And of course, at times of uncertainty, people will hold off making significant purchasing decisions like a new home or investment property.<\/p>\n

Currently, the media is full of negative headlines scaring off some potential buyers.<\/p>\n

Buying property is an emotion-heavy process, and buyers \u2013 both owner-occupiers and investors \u2013 often let their heartstrings pull them in directions their head might not.<\/p>\n

This is the one factor you have some personal control over, and, if you\u2019re savvy, you could use it to your advantage to get ahead of the game.<\/p>\n

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.<\/p>\n

Conversely, when others are paralysed by fear and bargains abound, your confidence in the advice you\u2019ve received from your buyer\u2019s agent or other professional could see you snap up a fantastic property \u2013 without even breaking a sweat.<\/p>\n

ALSO READ: <\/strong><\/span>The 5 Pillars of Smart Property Investing<\/a><\/p>\n