Economic Insights by Clifford Bennett

Australian Property – It’s Not Stopping!

Property Club Property Market Insights

Australia’s property market is well and truly hooked onto the freight train of cashed-up investors and developers which is resistant to any APRA or RBA tinkering on the brakes.  The property market remains very much on the move in Australia – across all regions and all sectors.

There are still plenty of large players looking to buy and invest, more than offsetting those holding off from what ‘seem’ like high prices.

Even APRA will not stop the property freight train

Even APRA will not stop the property freight train

The fact is, if you only own your own home, you simply have a peg in a moving wall. There is no benefit to prices rising. To benefit from this property market you need investment properties. It is not just for financial gain however, it is to maintain ownership of a part of Australia for future generations.

Prime locations from core centres to high quality transport and education locations, as well as of course beach-front where it exists, are all enjoying accelerating demand. This demand is coming from high levels of immigration, foreign student education, natural population growth, a more dynamic economy in general, and the now 2 billion wealthy people who surround us. We are just 23 million.

The competition, both local and foreign, for quality locations is only going to intensify dramatically from here.

At the same time, developers will be easing off their own particular accelerators as they become concerned with the antics of APRA and the banks toward regular investors. While people have been speaking of over supply developing in just one or two cities, the reality is that the demand curve will continue to outstrip supply, and even more so now, over the medium to long term.

The lack of supply is so severe that Chinese construction companies are now moving into Australia in joint ventures for various projects, such as the tallest residential tower in the southern hemisphere to be built at Surfers Paradise. Australian investors may not even get a look in however, as this project may sell completely off the plan into the Chinese market.

Property prices are at risk of sharp upward acceleration. 

There is no bubble,  just a coming of age of Australian property in the context of a regional economy. 

Those who think in terms of Australian statistics only in regard to Australian property prices are the ones missing the boat. The latest off the plan sales at the Jewel building on the Gold Coast are selling at twice the average prices previously seen. Then there is the fresh hope of what the change of leadership, and almost government (at least in terms of the style of government) that has just occurred brings.

While APRA will be holding back many individual investors, those who are cashed up and already in a strong position with property from past clever acquisitions will be seeing the opportunity to ‘buy now’ before a possible reaccelerating in the domestic economy as well as continued strong foreign demand helped by the low Australian dollar.

In a way it is a perfect storm for a price squeeze to the upside in coming months.

Those who sell now will never get back in, even at any price perhaps. This is still the bottom of the future range in property. The market isn’t stopping.