With the east coast of Australia becoming increasingly unaffordable and wage growth continuing to stall, east coast growth is tipped to slow, according to an industry expert.
In a conversation with Smart Property Investment, Sze Chuah, MLS Finance’s director, explains the current market cycle and why it’s getting harder for younger investors to get into the market.
Mr Chuah believes the negative influences on the economy, including the coronavirus, high levels of debt and low wage growth, will have an impact on the housing market.
“It’s going to mean there is a cap on growth even though the market is fairly hot at the moment,” Mr Chuah said.
Outlining how a lack of properties on the market, first home buyers itching to get into the market, low interest rates, a Liberal Party election win and the end of the royal commission are heating up markets, the property manager does not believe markets will repeat the previous decade.
“But perhaps for the next five to seven years, there may not be as much growth as we have seen in the last decade before the cycle potentially turns again,” Mr Chuah said.
However, Mr Chuah outlines in the meantime there are opportunities for investors in the property markets.
“With rents starting to pick up, its another win for investors that hold property because we’ve had that whole cycle of prices rising but yields falling as rents have not been doing much at all,” Mr Chuah continued.
Mr Chuah described the recent price rises on the east coast as a “double-edged sword” with implications for buyers and sellers.
“Obviously, [for] anyone with property it presents an opportunity because all of a sudden you have equity and you can expand your portfolio.
“But with the prices increasing, it is making it more difficult for new entrants to get into the property game,” Mr Chuah continued.
“Reflecting on my own clients, I have been writing a lot more guarantor loans in the last 12 to 18 months because everything is getting more expensive and it’s harder to get into the market.”
“So while there are young people with good incomes that are still relatively new to the workforce, they are still relying on their parents to get into the game by guarantor loans,” Mr Chuah concluded.