Bust or Correction??

//Bust or Correction??

Bust or Correction??

Given the mixed stories shared in the media recently, no one can blame you for feeling confused and concerned with what is being reported, yet some specialist have called it irresponsible reporting, because in the long run is this doing people justice?? “Is the market crashing” we get asked daily, well let’s talk about just that.

Let’s focus on the Melbourne market.
Now as you know there are several major drives and influences that determine market direction which fundamentally equates to Supply and Demand.
According to Australian Bureau of statistics, Last year Australia increased its population by 240K and it is predicted that by 2030 we will have a population of 32.4 million and as we all know a lot of this population is moving to the major Cities with Melbourne growth rate sitting at 3.21% resulting in over 10.5% higher than any other City in Aus, over the last 5 years. So I guess it’s fair to say with population being of consistent growth this will continue to push demand for supply.

The 2nd market driver is Employment Rate. www.abs.gov.au also report unemployment rate currently sits at 5.3% leaving this rate at its lowest since Nov 2012. Whilst wages in Australia increased on average of 1191.51 per week to 1207.40 in mid 2018 one could argue that the market should be as strong as ever, yet given housing prices corrections in patches of a markets can be favorable in order to have living costs meet affordability yet according to the National Australia Banks Survey forecast predict an increase of 5.5% overall for 2018 and 3.4% growth predicted the following year.

Thirdly, Infrastructure plans – A major player. It is estimated that by the year 2030 – 3.5million trips a day on Melbourne Roads and Tram, Train and bus trips are expected to grow by 75% requiring a budget of 700 million towards the metronet alone. This again points back to supply and demand and really does demonstrate its only going to get harder to get into the property market the longer it’s left. Ref to – Victorian Infrastructure Plan_Chapter 3_Government Response.pdf

When it comes to building a new home, the facts are in front of us daily. Land location is getting pushed out further and further from major City’s along with title dates for the land, this is a clear result of supply and demand. Building prices are NOT going to reduce, as it sits this falls back into the area of employment stats above resulting in suppliers materials and costs associated along with trades and staff employment.

In summary, is the market crashing?? Well without being psychic, we think we will let the numbers speak on this one.

At the moment, Melbourne is at a lower price point to Sydney so naturally the exploration is going to be greater.

Melbourne Property market

The Market has cooled. – Unique opportunity

Key Drivers over the market over the next few years

Fundamentally its always in retrospect of supply and demand –
What is driving demand and supply?

Population – 240K new to Aus
Average out likely to be by 2036 – 32.4 million people & by 2050 expected to be around the 40million people.
A lot of those people are going to Sydney and Melbourne

In the next few decades for Melbourne to reach 8 million people. & exceed the Sydney Market.

Atm Melbourne is still a lower price point to the Sydney Market – so the exploration is going to be greater.

Lets look at the next few years – Opportunity – Media might call it recession

Pockets of the market over supplied – they could even drop by 15% and that massive but not the whole market. Whats driving the market in different areas.

Once you understand Supply and demand you can basically predict the market.

Interest Rates – Have been low for a long time – Expect them to continue to be low – are they going to go up – yes but by much no> because 5.3
Expected by 2020 5.6 – 5.7 so yes it is going to be an increase – there is still plenty of opportunity to get in at these lower interest rates.

Inflation –
Very important – at the moment we are too low in the inflation factors – running at around 1.8 – 1.9 percent.
What we want it to be is at a great internal growth bubbling economy to sit around 2.5 – 3% – It’s already starting to happen.

Employment Rate running at about 6%
Debt levels are pretty good – over 50% of all homes in Aus have no debt against them.
Major corrections are typically driven by high levels of debt.
The standard variable rate is running at about

Infrastructure / Spending
Massive compounding effect – a lot at a federal level and State level. – Key driver
Ageing population, health, educations, roads – Things like that but the main one is infrastructure spending
When you look at a market – look at what is likely to happen

Now is a great time and opportunity other than 20 years ago –
The media reporting is irresponsible reporting without taking the above influences in any market into account.

This is a correction market and get rid of the non professional order takers in sales and brokerage.

2019-05-12T22:17:45+10:00 January 10th, 2019|