For every article about the property market in Australia booming, there is one forecasting doom and gloom. But despite the naysayers – property investment in Melbourne experienced a surge in the past couple of years.
This performance was amidst a two-year-long pandemic and significant economic challenges faced by two of the worlds’ super economies. So, what fuelled the growth, and what can we expect for 2022?
Property Market Influencers in 2021
Government grants, stimulus packages, and the recent expats returning and needing somewhere to hang their boots have continued to fuel this growth during 2021.
And, with the rise of remote working and generally staying at home, people have demanded more space and comfort. Hence a rise in demand for stand-alone dwellings.
In short, 2021 was the year that saw housing supply plummet and rents skyrocket. There just weren’t enough houses to go around.
It’s a new year, and the financial forecasters are again out with their crystal balls. Many predict a bursting bubble for 2022, but you don’t have to look far to find conflicting forecasts.
With so many differing opinions, it can be tough to know which Melbourne property investment will give you the best performance. And which Melbourne Property Adviser service can provide you with a complete and accurate market picture (uh hum).
Property investment in Melbourne, and indeed Australia, is different from most other forms of investment. You can’t take a one size fits all approach. There are many markets within markets, so you need research and time. The good news is – this means there are opportunities in all market conditions.
And, yes, it seems logical and always a good idea to keep an eye on current property prices, but is it going to matter in 10 years? It’s more important to concern yourself with what might happen 10 years from now. Successful property investing is all about long term gains, not short term market swings.
Are We Due for a Property Market Crash
Many analysts are warning that the Evergrande crisis in China, together with the massive surge in inflation in the United States, can topple the property market in Australia.
These crises are now a few months old, and despite a few wobbles, the market has continued to perform well. Listings have increased significantly but so have clearance rates. Prices in most areas are still growing.
It’s simple: supply and demand.
Property prices in Australia surged 22.1 per cent in 2021 and are predicted to increase again in 2022. We have a shortage of housing in Australia that is growing each year. During covid supply for new homes slowed even more. And our deficit is now forecast to reach 160,000 houses over the next decade.
Even during significant economic and global challenges, Australia hasn’t experienced colossal property losses because of these supply issues. In fact, the property market has often been a strong performer in uncertain times. During the 1991 Recession, property prices were down on average 10% in Melbourne, but some localities still achieved positive returns. During the Global Financial Crisis of 2007-2008, house prices dropped in Melbourne around 5% but then rose 15% the year after; during the 2018 Banking Crisis, Melbourne registered an average loss of just 6%, but many localities increased by more than 5% over the same period.
Even if the market was to drop 10% next year, as some commentators are predicting, the net result over two years might still be positive. Of course, your mileage may vary depending on where you buy, but the outlook is positive for many areas. Can you afford to avoid the prospect of a loss but continue to miss out on the chance of future gains?
Invest for The Long Term
As we mentioned before, property investment in Melbourne is a long game. Current upswings and downturns should be of interest but should not cause you to make dramatic changes to your property investment strategy.
Investment commentators were predicting a massive property crash as far as 3 years back. You would think that a pandemic would create the perfect storm to make this happen.
Fortunately for property investors, the reverse was true, and those who sold based on those predictions missed out on huge gains, more than 50% in some areas.
As experienced property investment advisors in Melbourne, we can tell you that property prices almost always trend upwards when you buy and hold for decades before realising your capital gains.
Are you considering investing in the Melbourne property market or need advice on maximising your investment in property? Call today and let us show you how to build a portfolio geared towards long-term gains.