Australia experienced a property boom during the pandemic, with property values rising more than 20% over 2021, adding $126,700 to the median value of an Australian home. Some experts are predicting that this
could lead to a property crash with the current market conditions. Find out what this could mean for you.
Australia’s property market defied expectations
According to CoreLogic, Australian house prices increased by 22% in 2021, led by the city of Sydney, where the prices rose by a record 25.3%. Some of the reasons for this inflated property pricing bubble have been record low
interest rates, healthy household balance sheets, and a new desire to reinvest in the home due to an extended work from home environment that has become part of the new normal. However, this better than expected surge in the property market has fuelled fears that a crash may be forthcoming this year.
What’s in store for 2022?
One of the world’s most famous fund managers is warning that a “super bubble” has been building for more than a decade and may be in the process of bursting. Jeremy Grantham, co-founder of GMO, claims to have predicted the Japanese crash of 1989, the dotcom bust of 2000 and the global financial crisis of 2008. He is now warning of another similar crash in asset prices. The key factors to contribute to this will be:
Interest rates- How frequently the Reserve bank will increase rates, now we have experienced the first rise and will mortgage payer’s be able to fund loan obligations if income is not increasing in line with increases in repayments and expenses.
Government incentives- There have been a number of government initiatives and announcements to help first home buyers and those looking to build both regional and metro. Whether this will help or hinder the market will depend on legislation changes and should incentivise buyers if the market does dip.
Investors holding multiple properties- The risk of those holding multiple loans/properties having to offload to continue to meet debt obligations. If we have a number of investors offloading properties at the same time, this could lead to a stabilising or decrease in property prices in certain areas.
Trends for this year
Like any investments, there will be peaks and troughs in the market and this may be limited to certain areas or the market as a whole. Below are some handy tips for savvy investors to consider as the market changes.
Consider your current and future investments
Being prepared in case a downturn happens unexpectedly can be beneficial if you have cash available to cover expenses or look to deploy into the market. Many investors with multiple properties have used the services of a Buyer’s Agent who can do all the legwork for you including research, reporting, projections, identifying off-market opportunities and negotiating on your behalf. If you need help re-evaluating your investments, please reach out to our Oran Park or Baulkham Hills office by calling (02)9188 1547. We service the Macarthur and Hills district area as well as the wider Sydney region.
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