- September 11, 2019
- Posted by: Rogers Property Group
- Category: International Property Market, Latest News, Property Investment
Given the historical low interest rates that we are having at the moment many people believe that the only ingredient to a boom in property prices is low interest rates. Hence, they are hoping that they go further down to create a stimulus. But low interest rates are not the only ingredients to a property boom. There are other factors that come into play as well and when all the ingredients come together the results can be very pleasing for investors.
Population Growth – The main driver behind demand in property is population growth if you have an area that more people want to live in then it goes without saying that if there is not enough to go around the price will grow. (This couples with supply which we will cover in a moment) Therefore, if you are a serious property investor, you need to be tracking your population growth around the country. At Rogers Property Group, this is exactly what we do for our clients.
Supply – When supply is not keeping up with demand there is a deficit created. When this happens prices are guaranteed to rise. It is a little bit like the kids party game of musical chairs. As the chairs start to become scarcer, the kids become more frantic to get one. This is exactly what happens with adults and property. Once the supply dries up. Provided there is still demand, people will pay more. However, if the supply does not reduce and someone keeps “adding a chair” or in property’s case creating a new house, it is unlikely that prices will grow. This is why you have to be very careful as to what area you are buying in, even if demand is strong.
Interest rates – The capacity for people to be able to invest is determined by how cheap money is. When there is strong demand and low supply all that is then needed in the catalyst is cheap money and the price increases will surely follow.
The above three ingredients are fairly easy to track and therefore the markets should not be too hard to predict. But unfortunately it is not an exact science.
Where are we at the moment?
Australia’s population stands at around 25.4 million, up 404,000 in 2018.
The ABS calculates one birth every 1 minute and 40 seconds, one death every 3 minutes and 19 seconds, one person arriving to live in Australia every 56 seconds, one Australian resident leaving Australia to live overseas every 1 minute and 53 seconds, leading to an overall total population increase of one person every 1 minute and 13 seconds.
NSW’s population sits at just over eight million, up 1.6% last year.
Victoria recorded the highest growth rate of all states and territories at 2.2%. The Northern Territory recorded the lowest growth rate at -0.4%.
Capital city growth accounted for 79% of Australia’s total population growth. The capital city with the largest increase in population was Melbourne (119,400 people), followed by Sydney (up 93,400 to around 5.2 million) and Brisbane (50,100).
The tables are now turned in 2019, Brisbane is now taking a major portion of population growth. With many families from southern states moving up to QLD following cheaper cost of living and job growth.
Supply is very much on a suburb by suburb basis. It generally comes to stand that the closer to the CBD you are the less supply that is available. In many of the western suburbs of Sydney, the north western suburbs of Melbourne and the North and the Western suburbs of Brisbane housing is over supplied with new product. Outside of these areas, developers have been slower to meet demand and hence prices have increased.
Interest rates are at historical low levels. All the indicators are pointing to them dropping even further. Money is very cheap at the moment.
Are all the ingredients there? Well in some areas – without doubt yes. It is just a matter of finding the right area to be investing in. If you would like more knowledge around what areas are good and what to avoid, then give us a call at the office or email us. If you are wanting to get started in property investment but are finding it a bit daunting, please contact us at the office via phone or email and we can give you a hand to get things off the ground.