Where are the warning signs in the market?
February 20, 2015 / Written by Rich Harvey
We hear a lot about the great aspects of the market - the constantly rising Sydney property prices that are creating great investment conditions, the lower cash rate which creates great conditions for securing a low interest rate on your loan and the like. But what about the warning signs?
While it's great to take advantage while the times are good, everyone involved in Australian property investment knows to watch for signs that things might not go their way. That way you can be properly prepared, come rain or shine.
Will supply run dry?
In a February 19 release from the Housing Industry Association (HIA), increasing concerns were noted regarding the supply of land for residential development in Australia. HIA Senior Economist Shane Garrett explored this in greater detail:
"During the September 2014 quarter, the number of land market transactions fell, while price growth accelerated. These are the classic hallmarks of a market which is fast running into supply problems".
He added that land ready for residential development is starting to dry up, which could create a huge constriction on the market. Low supply drives prices right up, outside of the realm of affordability for many buyers. There needs to be action on a governmental level to ease the process of creating land, which can then moderate prices while keeping them in a growth phase.
There is still a lot of great property to be found on the market - but if supply issues can be resolved, then you'll find there is even more. The NSW State Government has tried to reform the planning process but this got rejected by the Upper House in 2014 so new planning laws and rezoning are in a state of flux.
On top of these delays, developer charges for new land releases are very expensive. This keeps a lid on new land supply in Sydney especially.
Down with the dollar
In his February 3 statement on the official cash rate, Reserve Bank of Australia Governor Glenn Stevens noted that despite declining against the US dollar, Australia's exchange rate remained strong against many other currencies. He said this would need to balance out for our economy to stay steady.
Meanwhile, in his predictions for the coming year, Cameron Kusher from CoreLogic RP Data said a lower dollar would also engage more foreign investment into the country. This could see a glut of new apartment complexes rise up, providing further options for house hunters in Sydney and beyond. However, it's important that you keep an eye on the dollar, in case it starts creeping up again.
There are many more factors to watch, too: Unemployment and lending finance, for starters. There's a minefield of data to comb over and to to ensure you don't miss anything, it's a great idea to engage the services of a qualified, experienced, thorough buyers' agent. Their deep understanding of the market can help you learn how these factors impact your property search.