Today, we are going to talk about the current state of the Australian real estate market, and from there, we will help you determine if now is a good time to get involved in the property market.
Why Are Home Prices Falling in Australia?
For months, housing market conditions in major Australian cities, including Sydney and Melbourne, have been weak. As dropping investment levels and tighter lending conditions continue to influence the market, this phenomenon is expected to continue a bit more.
One of the factors causing the drops are credit restrictions that APRA has put onto major banks and lending institutions. Consequently, it’s been more challenging for investors to borrow the money they need to purchase such properties.
UPDATE 12/6/2019: APRA has now loosened its’ tight lending standards to help promote lending in the economy. The move has increased the borrowing capacity for buyers and made it easier to get into the market.
We spoke to CEO of Park Trent, Ron Cross, who says we shouldn’t be worried about the recent correction in housing prices after decades of sustained increases, what is more important is the ongoing increasing cost of labour and materials. In the past two years, these costs have increased by about 40 per cent.
Due to these new credit restrictions and government spending funding an infrastructure boom, we should see significant increases in labour and material costs. In turn, these factors should affect property prices. That brings us to this important question: should you get into the property market now?
Is it a Great Time to Invest in Real Estate?
Cross believes that the housing downturn is a necessary evil that will lead to a healthier marketplace. Giving everyone ample time to breathe and allow the market to stabilize. More importantly, he’s convinced it’s the perfect opportunity to make an investment.
Everyone’s forced to adjust to Australia’s housing downturn, including foreign investors. While they normally view the country as a great avenue for real estate investment, they’ve had to back up a bit because of the extra costs they entail.
Remember that property is a long-term investment. As consumers, we need to understand that investing in property won’t make us rich overnight. But having such assets under our name produces great returns over time.
As mentioned, we are expected to see major price increases in construction and material costs. Residential property prices should see increases as a result. Hence, if you’re looking to invest, now is the best time to do it.
There are many ways to get into the property market. At Dollars With Sense, we assist first-time investors, first home buyers, young families and future retirees. We will ensure that you get the right financial education and the appropriate financial structure set up so that you have peace of mind.
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