Sydney Property Market Update 17/08/2019
We find ourselves in strange times.
With interest rates appearing like they may even fall further in the next six to twelve months it's a distinct possibility the average variable home loan could soon be as low as 3%!
And looking towards the next five to ten years I find it very hard to see rates even heading back towards 5% based on what's happening both domestically and globally in the economy.
Australians have traditionally been a nation of spenders like all other first world western democracies. But inflation has been well below our recommended 2-3% band for some time now after decades of difficulty keeping it in rein.
With stagnant wage growth the main driver of our spending habits, it may be some time until things change significantly.
So, what does all this mean for the property market?
Low rates will always attract those on a stable income looking to create wealth through bricks and mortar. I think more people will see this asset class as increasingly more secure to put their money in to. Let's face it, compared to the potential volatility of superannuation and shares (does anyone remember the GFC?) and the current woeful yields on bank deposits and the like, property is a more consistent performer.
But what type of property?
This is where things appear to be changing the most. In any market for any item or service the simple mechanics of supply and demand tell you that if you invest in something that will be in more plentiful supply then the future growth prospects are poor.
So, what specific property fits this description?
A house? Land? Old established apartments?
Obviously, none of the above. New apartments are the most likely to be exposed to this risk. We are now well into a decade of tens of thousands of new apartments hitting our city streets. And when is "new" no longer new? Two years, five years?
The recent media focus on the remedial issues with many of these buildings has finally educated buyers on what type of real estate would be a safe long-term investment.
I expect this item to struggle the most in the next ten years as savvy buyers who are watching their pennies more closely now, opt for the "daggy" but reliable and functional property to pour their hard-earned money into.
I may be wrong but as I said these are strange times.
That's it from me. Have a great weekend and I'll see you next week!
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