By Guest Blogger: John Lindeman, CEO
www.lindemanreports.com.au
While most of the world continues its struggle to overcome the COVID-19 pandemic, Australia seems to have succeeded. We have put all those lockdowns, border closures and social distancing restrictions, plus the uncertainty and loss of confidence that came with them, behind us at last.
To stimulate our economy back into growth, our government is lending itself vast amounts of cheap money for massive job creation schemes, infrastructure projects and economy boosting spending programs. Because the property market is such a large contributor to economic growth and job creation, it has been one of the government’s main focus points.
We are now seeing first time buyers being propelled into the housing market with easy, low cost finance and huge government property buying incentives. The number of first time buyers has doubled in recent months, pushing housing prices up in all areas where they are still affordable.
In addition, many existing home owners are taking the opportunity to upgrade to better homes in more suitable locations, causing a general price ripple effect to occur. Unlike our last property market boom, however, this rise in demand is not coming from investors who prefer big cities such as Sydney or Melbourne, but from owner occupiers, which means that it is taking place everywhere at the same time.
The low cost of borrowing and availability of finance is behind this surge in buyer demand, as renters transition to first home buyers and first home buyers become upgraders. It will only continue until all those who want to and can afford to buy a home or to upgrade have done so. Interest rates can hardly fall any further, so the next housing market boom will not occur until demand rises from another source – more households.
We have experienced international border closures before – during the First and Second World Wars, when overseas travel was dangerous and migration came to a standstill. When our borders were thrown open again in 1919 and 1946 we experienced our highest population growth ever, as thousands of immigrants and refugees fled war torn countries to make a new start in Australia. As the graphs show, this huge rise in housing demand caused housing prices to boom in just a few years.
Despite this hard evidence which links high population growth to house prices doubling and even trebling in a few years, some cynics are claiming that this time round prices won’t double after our borders are reopened because they can’t.
John Lindeman is the In-Depth columnist for Your Investment Property Magazine and a popular contributor to property related media. John also authored the landmark best-selling books for property investors, Mastering the Australian Housing Market and Unlocking the Property Market, both published by Wileys. Visit www.lindemanreports.com.au
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