Property markets defy the “doom and gloom” predictions

We are now well into the year and our property markets are showing their strength with median property prices continuing to defy the naysayers who were predicting a rather tumultuous start to the year.

In the wake of rising interest rates, constant talk of affordability issues and the end to the first home owner’s bonus in late 2009, many commentators felt that the beginning of this year would see us end up with an over-inflated housing bubble that was destined to burst.

However as Residex’s latest figures show, Australia’s property markets keep growing stronger:

Confidence started creeping back into the property sector in the second half of 2009 as Australians realised we had escaped relatively unscathed from the GFC that hit much of the rest of the world pretty hard.

In fact, recent reports have shown that apart from Norway, Australian property was the strongest of all developed nations for 2009, showing the most resilience to the economic downturn.

Now that unemployment levels are starting to drop and our economy is looking healthier every day, home buyer and investor activity is starting to pick up and many want to get their foot in the property door before the current boom conditions we’re experiencing see prices soar even higher.

There is a lot of pent up demand from would-be home owners and investors who sat on their hands for much of 2009 to “wait and see” whether real estate here would withstand the rough economic seas.

Those who had put off entering the market, upgrading, starting a property portfolio or building on their existing portfolio are now feeling a sense of urgency to make a move, as they hear many predictions that the market will become even hotter in the coming months.

Adding to this pressure cooker effect is the lack of stock, in part due to the fact that last year’s slow down saw many developers hold back from commencing new constructions, at the same time as we had a population explosion due to record immigration figures and a baby boom.

Putting all this together has many property experts suggesting that we are on the brink of some pretty heavy duty boom conditions as the property cycle moves into overdrive over the coming months.

The question many buyers and investors are asking now is: have I missed the boat?

The answer is pretty clear – no it’s not too late!

2010 will be a very exciting year for property in Australia’s capital cities and we can expect prices of certain properties to increase significantly, but that doesn’t mean you can buy any property. As always, it’s about buying right and buying smart.

As property prices increase and interest rates rise, affordability will become an issue particularly in the outer and lower priced suburbs, where owners are more sensitive to interest rate increases, which will slow the growth of properties in these areas.

However, prices are likely to continue rising in the upper and middle price suburbs, where there is strong demand from owner occupiers wanting to upgrade their homes and investors to get a foothold in the market.

It is this supply and demand equation that will underpin our property values. There will always be affordable properties around – there always have been. You can buy a cheap property today in many rural parts of Australia. These properties are cheap because fewer people want to live there.

We all want to live where everyone else wants to live. And we won’t all be able to afford to buy a property in our capital cities.

Have you noticed that when people can’t afford to buy a property in the particular area where they would like to live, while some move to cheaper areas, many others are happy to rent in their preferred area? So property values will keep increasing in selected areas and so will rentals.

Yes… the rich will keep getting richer.

Fortunately in Australia, almost everybody has the opportunity to become wealthy through property.

Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.