A Look Inside the Real Estate Market

Written by Posted On Saturday, 02 November 2019 01:01

Moving to Australia is quite the experience. Discover the Australia real estate market and the housing trends that are emerging in 2020.

You're an American who got a good job in Australia. You must relocate your family. You're assessing the various houses in the Melbourne area.

You notice that homes come with a lower-than-expected price tag. The real estate agent says you should buy now before prices begin to rise. 

You apply for a mortgage loan from a bank. Surprisingly, they approve your application. Now you can afford that dream home in Melbourne.

This scenario applies to many home seekers in Austalia who benefit from less stringent lending standards. Due to easy access to credit and lower interest rates, the Australia real estate market is rebounding.

Experts expect prices to rise as more people enter the housing market. And, prices have already risen in certain cities, such as Sydney and Melbourne. 

On the other hand, other experts predict a coming glut that will lower prices in the future. This article will provide a comprehensive guide into the Australian real estate market for potential movers. Let's explore. 

Hunt for a Good Deal

While homebuyers benefit from the lower prices, many fear that prices will go up in the next 12 months. More buyers will enter the market, fearing they will miss out on a good deal. In certain parts of Australia, the increase in housing has already priced many buyers out of the market.

Living in Sydney, for instance, requires more income than other cities. Sydney is the nation's biggest and most expensive real estate market. The city will see rising prices until the end of 2019 and beyond.

Sydney's auction clearance rates jumped 75 percent in August compared to 52 percent a year ago. Clearance auctions are the most common selling method in the Australian housing market.

Other cities with price upswings include:

  • Hobart
  • Melbourne
  • Darwin
  • Brisbane

All of these cities saw price upticks in September 2019. Sydney and Melbourne have some of the highest economic growth in the nation. And, both cities have lower unemployment.

However, price growth will depend on the region. In particular, the inner cities of Melbourne and Sydney have stronger housing prices due to greater buyer demand and less supply. 

These cities also have greater investment activity, causing expansive job growth. This has fueled demand for housing, leading to higher prices.

Potential Housing Glut

Not every expert remains optimistic about the housing rebound. The coming Spring season could see additional inventory that drives down housing prices. In particular, Melbourne and Sydney could see more available apartments in the Spring.

If you're moving to Sydney, Australia, you could take advantage of the potential housing glut if you find yourself priced out of the market. Sydney apartments alone contributed five percent of the nation's housing supply.

Officials expect the increased housing to continue for the next two years. This could dampen prices in the future and slow down housing development. 

With that, experts expect incoming immigrants to fuel the housing demand. Many of the incoming immigrants in Australia can afford to buy homes. Regardless of your immigration status, choose reliable interstate removalists who will transport your belongings responsibly.

Despite immigrant interest in the housing market, experts fear that demand cannot keep up with supply. If the oversupply continues, this is good news for buyers who couldn't afford a home anywhere in Australia.

The Rental Option

Due to rising prices, more Australians are renting instead of buying houses. In Australia, renting has been a primary option for students and low-income families. Now, more families are renting homes than ever before.

In part, the reason is because of the Reserve Bank's interest rate cut by .25 percent. 

This means that borrowing costs are lower, fueling greater demand in the process. The demand caused a surge in prices, leaving out many aspiring homebuyers. Therefore, renting is a more lucrative option in pricier cities like Sydney. 

What is it like to live in Sydney, Australia as a renter? It's no different than any other Australian city. Renting is a more affordable option in Australia, but the law allows landlords to evict tenants without sound reason.

And, short-term leasing is the most common agreement, with fewer long-term leases. A long-term lease is one that lasts 12 months or longer. These conditions can make renting uncertain and unstable.  

Economic Outlook

Another reason why renting has surged is because of a sluggish economy. To make matters worse, Australians have long contended with stagnant wages.

Currently, Australia's annual wage growth remains at a disappointing 2.3 percent. And, Australia is the second-greatest debtor nation behind Switzerland.

As a result, the Reserve Bank decided to cut interest rates to encourage first-time buyers to enter the housing market. With that, experts fear that such short-term growth isn't viable in the long-term. 

The combination of high household debt and flatlined wages means more people cannot afford homes in the future. 

The Australian economy also faces a dark cloud of uncertainty. Fears of a global recession could have a negative impact on the economy.

If no worldwide downturn occurs, Australia could see a housing dip of 10 percent in the next ten years. In the event of a recession, that number could fall to 20 percent.

This is pertinent news for Americans moving to Australia, or any other foreigner. 

If you're looking for the safest sectors, consider the following:

  • Healthcare and Social Work
  • Manufacturing
  • Retail Trade
  • Public Administration

These are some of the fastest-growing sectors in Australia. In particular, healthcare is among the most stable due to an aging population and increased demand.

Construction, on the other hand, could lose thousands of high-paying jobs. A development slowdown could also alleviate an oversupply, increasing housing prices in the process. 

Australia Real Estate Market Verdict

The Australia real estate market will see rising prices due to greater demand. Because of interest rate cuts and lax borrowing standards, more buyers want to buy homes. With that, an oversupply of homes in the spring could drive down prices.

Another wild card that could affect the Australia real estate market is the economy. A sluggish economy and stagnant wages could leave more people out of the market.

Overall, experts are uncertain about Australia's economic viability and how it will affect housing prices, especially with lingering fears of a global recession. 

Are you looking to move to Australia? Check out the rest of our blog for more tips.

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