Property has consistently been one of the most popular asset classes in Australia, so much so that it has become of national interest to sustain the value of real estate across the country, due to responsible lending and the unique demographic position of Australia. Here's how.
Banks and the government are continuously working together to keep the industry sustainable, Smart Property Investment’s Phil Tarrant said.
In fact, the recent changes in lending regulations by the Australian Prudential Regulation Authority (APRA) were set up to ensure that the market grows sustainably for the long-term.
According to Mr Tarrant: “The last thing anyone wants to see is markets [folding] and owner-occupiers feeling the brunt of negative price growth. There are lots of moving parts here because there's a national interest.”
Tempering the market is one way to remind Australians about the importance of responsibility and sustainability for the common good, Momentum Media’s Alex Whitlock said.
In general, according to Mr Whitlock, Australians have always been debt-averse and lenders have been far more conservative compared to their counterparts in Asian and American markets.
The tighter lending controls in Australia have made both lenders and borrowers accountable for their decisions, which is why he personally doesn’t believe that any unprecedented drop in markets will happen soon. This collective approach has made for a healthy investing environment across the country.
Pure Property Investment’s Paul Glossop said that there are currently more than 7 trillion residential properties in Australia, with loan-to-value ratios (LVR) sitting at an average of 25 per cent—an indicator of a strong market and a robust economy.
APRA’s recent changes in lending regulations only furthered the efforts to maintain this position, he said.
The property professional explained: “We're talking around about … 2 trillion in debt, and we're talking about just short of two trillion in the … superannuation market. We're talking about just short of a trillion in the commercial market. But long and short of it, our LVRs are sitting sub-25 per cent as a country.”
“We've got a very, very robust economy that comes into play … We've got a very, very good position in total LVRs. When we've got banking restrictions that don't allow people to effectively walk away from debt, and there's a lot of ramifications down the track, that's going to leave us in good stead,” he added.
Aside from a general regard for responsible lending, Australia’s unique geographic position is also among the top growth drivers for investments.
Its proximity to the Asian region, as well the overall lifestyle in the country, makes it an attractive place to study, work, or even live, Mr Whitlock said. The consistent influx of immigrants means a continuous demand for dwellings, which ultimately keeps the property industry alive.
According to him: “You've just got this unique blend of people in Australia and the way that the country is growing and shaping … it's got sustainable forecast for growth. People want to live here.”
“You go along, it doesn't matter where you live in Australia. It is a fantastic place to live and there's always going to be a desire to move here, [so there will] be factors that drive the growth.
“When you look at places in Sydney or look at two-bedroom apartments in , which are going for a couple of million bucks—just look at the place. And there's a host of other markets like that,” he added.
As good as the Australian market sounds, Mr Tarrant strongly encourages doing due diligence before jumping in and investing in property. Be educated and know the right resources in order to get the necessary and correct information, which is instrumental to success in the industry, he said.
“Just be careful where you get your information from … The sky's not going to fall in, but you still need to be responsible how you invest in property,” he concluded.
Tune in to Paul Glossop and Alex Whitlock's episode on The Smart Property Investment Show to know more about the markets in Australia and how they are currently performing.