What are the key economic fundamentals that drive our property market?

1)      Population growth

Australia has one of the fastest population growths in the western world. Based on conservative assumptions, Economists BIS Shrapnel estimate Australia’s population will increase by 5.3 million within the next 13 years. With an average of 2.5 people per household this translates to a need for an additional 2.1 million new homes.

2)      Construction of new housing

According to many analysts, Australia has a shortage of new housing.  This is not true of all areas. For example there are pockets of oversupply such as apartments in the inner city of Melbourne and house and land packages in some new subdivisions in the outer suburbs.  However, there is a constant shortage of housing in the popular inner to middle suburbs.

3)       Employment

Unemployment in Australia currently sits under 6% which is far better than most other countries around the world. For the property market to be adversely affected by unemployment we have to have a substantial increase in the number of people losing their jobs and not being able to meet their mortgage repayments thereby  forcing them  to sell. This is an unlikely scenario given our strong economy and current low interest rates.

4)      Interest Rates

Interest rates are the lowest they have been for many years. Low interest rates help the affordability of housing. People today have greater buying power and a higher disposable income.

5)      Consumer Sentiment

Consumer sentiment is something that is hard to measure and generally reflects the mood in the market place. With the change in government, coupled with low interest rates and a strong economy, there are strong signs that higher levels of confidence are back in the property market.

As you can see from the basic economic fundamentals, Australia is poised for a property market that should continue to rise over the coming years.



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