The Aussie property market has undergone quite a few shifts in recent years thanks to the pandemic, global affairs and economic changes, among many other influences. However, despite the dynamic nature of the market, it remains a very robust asset class in the economy.
We might be just a little biased, but we reckon there are countless benefits to putting your money into Australian property. Let’s explore some of the reasons it’s worth investing in.
Good quality of life
Australia’s lifestyle is world-renowned. Sydney and Melbourne, in particular, are globally connected metropolises; each offers a high standard of living, internationally respected educational institutions and a fantastic healthcare system.
While this is certainly an obvious drawcard for anyone looking to relocate or move back to Australia, it’s also a boon to investors. The unparalleled lifestyle here attracts people from all over the world, including immigrants, tourists and international students.
With increased migration comes a greater need for housing, especially in major cities or regional centres with universities or immigration incentives. In fact, newly arrived migrants typically account for an astounding 60 to 70 per cent of housing demand.
Strategically located in the Asia-Pacific region with a mega market of billions of people, Australia has experienced a strong and growing appetite for its properties from middle-class people in the region. This is one of the drivers for the continued growth of property in Australia over the last decades and into the future. It also means investing in a lucrative area can generate a solid rental yield, a consistently low vacancy rate and good long-term returns.
A robust, established system
Australia has a longstanding culture of homeownership and using property as a means for wealth creation, which is underpinned by government strategies (lending policies and first home buyer schemes, among others) and tax incentives (negative gearing and other property-centric tax deductions).
With property such a top priority, naturally, Australia has bred a robust and resilient system that has managed to withstand numerous global events. Even in 2008 – in the grips of the GFC and when the American property market experienced a hefty downturn, to put it lightly – the Australian market managed to more or less stay afloat. (It bounced back relatively quickly following a brief dip.)
The market’s comparative success was due to a dramatic cut in the cash rate by the RBA, along with Federal Government interventions like increasing the first home buyer grant and introducing other policy measures such as attracting more overseas migrants.
Stable – and strong – capital growth
We’ve already established that the Australian property market is nothing if not resilient, and its capital growth rate is cold, hard proof of its might. Despite short-term volatility, the market tends to provide stable and healthy capital growth in the long term: on average, it appreciates around 6 to 7 per cent per year.
Our data shows that this growth is only set to continue.
First of all, we believe the February opening of Australia’s borders will trigger a wave of migration and a consequent need for housing over the next 18-24 months. In fact, Australian visa offices worldwide have put in place fast-track processing for over 1 million visa applications that are in the queue, mostly long-term visas such as students and workers.
The recent interest rate rises by the RBA may have signalled an end to the record low rates we experienced post-COVID. However, it’s important to remember that while they’re on the rise, they’re still well below historical highs. Plus, some investors are chasing stronger yields to offset the increase in mortgage rates.
We expect rates to continue to grow in 2022, with the RBA to take a ‘watch and act’ position in 2023 as the impact of the current increases will be realised. As soon as inflation falls back toward the target of 2-3 per cent, the RBA will hand-brake its current tightening policy: some economists are forecasting rates to cool at some point in 2023, as there are signs the prices of oil and other inputs have been declining and stabilising in recent weeks.
Lastly, with fewer new building approvals over the course of the pandemic, there’s likely to be a property shortage in the coming years. As a result, we’ll likely see greater demand, mostly with established properties, given the prohibitive cost of constructing new homes for some people.
A wide choice of markets
While there are some characteristics that define the Australian property market as a whole, the reality is that it’s made up of numerous sub-markets. It’s the distinctions between them that make Australian real estate dynamic and full of options, with each sub-market offering a different price range, rental yield, capital growth and lifestyle.
And it’s not just the major east coast capitals that are favourable to investors. Regional satellite cities like Newcastle, Ballarat, Geelong, the Gold Coast and locations across the Sunshine Coast are seeing big investment thanks to strong growth in both their primary and emerging industries, improved infrastructure and transport links, and job creation.
As well, state governments are investing in regional centres in an effort to ease pressure on major cities. The Victorian Government, for example, has moved a significant portion of its workforce to Ballarat. All of this means investors looking for affordable entry prices are offered a wider choice of markets to invest in beyond the capital cities.
Ready to invest in the Aussie property market? Whether you’re a new investor or want to expand your existing portfolio, we’re here to help. Contact us today.
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