Fighting back against the ‘doom and gloom’ being felt by some property investors, here are five reasons why you should feel positive about the Australian housing market at the moment.
There are five presiding factors that are promising for the Australian property market at present, and most of the good news is focused on job creation and increased wealth, according to property investor and head of research at Propertyology, Simon Pressley, on the Smart Property Investment Show.
Despite the level of sovereign debt that the Australian government has accumulated, which according to its own budget numbers was around $350 billion in the 2018-19 financial year, Mr Pressley said that Australia’s finances “are actually in pretty good shape, and a lot better shape than… at any time for probably more than 10 years”.
Mr Presley said that the budget surplus means the “government has a greater capacity to fund infrastructure projects and essential services.”
“Again, bring it back to a smaller scale. If it was your household budget, if you had a pay rise or all of a sudden your expenses reduced for whatever reason, you got greater capacity to do things,” he said.
This is a good thing at a national level for property investors, according to Mr Presley, because in his own words, the “biggest influence on any property market is economics”.
“So, if our national economy is better in 2019 than any size of [the] last 10 years … the outlook for our property market is better than what it has been for a long time,” Mr Pressley stated.
Mr Pressley said that Australia has seen two consecutive years where more than 300,000 jobs have been created annually, which he said hasn’t happened before.
“We have had a few years before where this nation has created 300,000 or more jobs in a calendar year, but not many and certainly not in consecutive years,” he claimed.
Despite this increase in jobs, Mr Pressley noted that all we keep hearing about is property market doom and gloom in the media.
“Now, 200,000 of those jobs are outside of our eight cities – that doesn’t get reported. Why have we been focused on regional cities for a few years now?” Mr Presley asked.
“Because, we anticipated that those economies were going to be improved. And they have and those markets have been strong.”
With job creation in regional areas, there can often be property market booms as new towns and cities can begin sprawling, as population increase and demand for property through industry expansion makes them more desirable investment locations.
The Sydney-based property investor said that tight housing supply nation-wide is leading to increased rental prices, which is a positive for landlords.
“Everyone knows it’s not tidy in Sydney and Melbourne… [but] if we put all dwellings together, Brisbane certainly doesn’t have a supply issue, and neither does the six capital cities other than Sydney and Melbourne,” Mr Pressley said.
“And vacancy rates are really shrinking, especially again outside those big capital cities.”
According to Mr Pressley, developers generally dictate supply, but it is currently hard for larger developers to get funding.
He said such markets are everywhere throughout Australia and will likely stay tight for a while.
“We’re going to see not just tight housing supply, which puts pressure on prices, but we’re also going to see rents trending up, possibly more than what we’ve seen for a decade,” Mr Pressley said.
President Donald Trump and President Xi Jinping’s recent decision to ease the ‘trade war’ to stimulate economic activity between the US and China has also been beneficial to the Australian stock market.
But China and America aside, Mr Pressley stated that there are about four to five major free trade agreements that Australia has recently signed with big countries, which are also beneficial to not only the stock market, but the housing market as well.
“China, South Korea, Vietnam, Japan. We’ve signed what they call a TPP, Trans-Pacific [Partnership], which is a similar trade agreement really,” Mr Pressley said.
“What this means to Australia is the cost for someone in another country to buy our goods and services – we’re wiping a lot of the taxes off. And especially our agricultural products… progressively over the next few years, there’ll be no tariffs on those or no taxes on those.”
According to Mr Pressley, this makes it much cheaper for other countries to buy our exports and, consequently, creates paths for Australian business owners to expand their businesses to employ up to hundreds of thousands of people.
He claimed that this is partly why regional Australia is already seeing business expansions of not only farms, but factories and other industrial developments.
“It’s in logistics, it's in warehousing, it’s in ports, it’s in airports. And we are talking hundreds of thousands of jobs forever and a day. This is super exciting for Australian property investors,” Mr Pressley said.
In short, free trade agreements are likely to further increase job creation, which could push up wages, meaning there could be more Australians with increased incomes and consumer confidence to look at opportunities to invest in property.
The government has recently unveiled plans to manufacture a defence force fleet by investing $200 billion over 10 years, to which Mr Pressley stressed the significance for property investors.
“What does that mean to a property investor? It’s jobs and it’s jobs right around the country. And it’s not one or two jobs, it’s hundreds of thousands of jobs,” Mr Pressley said.
He concluded by saying that the biggest influence on any market or property investor is “always economic-related stuff”.