Australia’s hot property market has been taking a few knocks recently, and analysts are divided. The market is going up, or down, depending on who’s talking. The facts are a bit more complex than that. Some parts of the property investmentmarket are doing reasonably well, despite global worries. Others are flatlining or going backwards. If you’re a property investor, or looking at buying investment property, it’s worth taking a long hard look at the facts.
The core issues
The Australian property market is a lot more complex than it looks in the media. It’s not just about home buyers and mortgages. There’s an entire, multi-billion dollar second tier of property investment holdings and an even bigger third tier of development investment to consider. There’s also the banking and financial inputs to look at in terms of availability of money for investment.
The big issues confronting the Australian property market are actually capital issues. If you’ve been reading about banks and the cost of their borrowings recently, that’s one of the real physical issues which directly affects Australian property prices. The cost of the banks’ borrowings directly impacts their lending rates, which in turn affects borrowers’ ability to finance new investments, particularly in the property market.
Current predictions
The current predictions for the Australian property market tend to be a bit generalized and often contradict each other:
· The market will go down because the cost of borrowing will become higher, and there’ll be less money to finance purchases.
· The market will either remain flat or go up because the basic rates of interest rates from the Reserve Bank of Australia are going down.
· There’s a housing price bubble, and the bubble will burst as a result of pressures on borrowing.
· There is no housing price bubble and the market will remain slow but relatively stable.
There’s some other factual information which is also highly relevant, and when seen in context with these opinions, tells another story:
· There’s a chronic shortage of new housing and rental properties on the market compared to past boom markets
· First home buyers are finding it difficult to get into the market
· High end property prices are falling
· Demand for housing is still basically strong
The property investment market issues and solutions
As you can see, the opinions, right or wrong, and the facts don’t lead to a simplistic, black and white answer in property investment terms. Interpreting this information, you can see that there definitely are some areas of investment opportunities related to demand for both housing and rental properties. The capital market issues define the risk management scenarios.
The solution for property investors in this very complicated and often contradictory market is to get good property investment advice. When you’re looking at an investment property, this means getting access to professional expertise and sources of information to accurately and thoroughly assess both risks and upsides related to that property.
The most successful property investors in Australia are hard-headed and very pragmatic. They have their own opinions, but they base them on a combination of facts and good advice from experts. That’s also the best way to approach this market.
