Property Market Correction or Bust?

What’s really going on in the Victorian Housing Market.

 A couple of weeks ago, a report on Channel Nine’s 60 minutes said the Property Market could slide by as much as 40% in the next year.

This is just one of many media sources terrifying Australian property owners with headlines such as…

            “Properties slashed by as much as 15 per cent”

            “Housing slump”

            “A phone call that could drop house prices by 80 per cent”

            “Another financial crisis hits”

Now if you haven’t spotted it… there are inconsistencies in what’s being said by the media. Some specialists have even called this “irresponsible reporting”. But, it is understandable why there is an air of concern among many property owners across Australia.

 

It all comes down to one question: –

“Is the market really crashing?”

To answer this question, we need to first understand the factors that drive the property market. Three key factors being:

  1. Population Growth
  2. Employment Rate
  3. Infrastructure Developments & Future Plans

And second, to look at the statistics to understand how the market is trending. The following section provides a snapshot of the current market based on the three factors and the facts.

 

1. Population Growth

Why do we look at population growth?

Population growth is an indicator of demand. As the population grows, the demand for housing will also typically increase.

What do the statistics tell us?

In the past year, Australia’s population has increased by approximately 240,000 people. It’s projected that by 2030, we will have a population of 32.4 million – which is an estimated additional of 7.5 million people in Australia.

What does this mean for the Victorian Housing Market?

A large proportion of this “added” population will move to major cities across Australia.

With Melbourne’s population growth rate sitting at 3.21%, higher than any other major city in Australia, it is predicted that most will flock to this city – meaning increasing demand for property.

 

2. Unemployment Rates

Why do we look at unemployment rates?

 Unemployment rates are a benchmark to measure an overall health of an economy. People typically reside in cities where there are more job opportunities.

What do the statistics tell us?

The Australian unemployment rate is currently sitting at 5.3% – which is the lowest it has been since November 2012.  And wages have increased on average from $1191.51 per week to $1207.40 in the past year.

What does this mean for the Victorian Housing Market?

The market is still strong and the housing prices will correct itself in patches. Although wage growth is minimal while property prices have dramatically increased in price, it is said that people are still able to afford it.

 

3. Infrastructure Developments & Future Plans 

Why do we look at infrastructure Developments & Future Plans?

 Major infrastructure upgrades are frequently associated with strong demand in local markets.

It provides essential services that drive employment, productivity and economic growth. Some examples of infrastructure include utilities, transport and social community (such as hospitals and schools) 

What do the statistics tell us?

It is estimated that 3.5m trips will be made daily on Melbourne roads, trams, trains and buses. An infrastructure investment budget of $700m will be required to upgrade the metro network alone.

What does this mean for the Victorian Housing Market?

The demand for housing in the Victorian market is still strong. While there are many other statistics to be shared, this one along demonstrates that it’s only going to get more difficult to enter this property market.

 

In Summary

We have media and we have facts.

When it comes to building a new home or investing in another property, you must assess the facts and choose what you take in from the media.

Land location is getting pushed out further and further from major cities along with title dates for the land – a clear result of increasing supply and demand.

So, is the market crashing?

We will let the numbers and facts speak on this one.  The best time to buy was yesterday, and every day thereafter will cost you more.

We provide 1-1 strategy sessions for Australians looking to enter the investment property market. Contact us to see if you qualify for a free session.

By | 2018-10-18T15:44:32+00:00 October 18th, 2018|Investment, Property, Wealth|