Exposing Australia's Housing Crisis
The good news is that you still have time to do something to prevent it from affecting you. Australia is one of the few (or rather, ONLY) developed countries that has not been affected by a recession
The good news is that you still have time to do something to prevent it from affecting you.
Australia is one of the few (or rather, ONLY) developed countries that has not been affected by a recession in 27 years - no other developed country can stake such a claim.
This can be credited to Australia being one of China’s top raw material suppliers during its historic boom. However, all good things must come to an end. Don’t worry yet! While it is not officially a recession yet, there have been telling signs, especially with the slowdown in the real estate industry, beginning with the rental property shortage.
The market is seeing an imbalance in the demand and supply of rental properties - while the demand remains high, the supply is rather low as people are not buying new properties. One can already see a semblance of a rental crisis in Melbourne, Sydney and Brisbane.
The three-pillars of the potential downfall
The reason for this is threefold. The first being a massive decline in new housing. Approvals and new construction has fallen off a cliff. Very few or no new properties are being developed. A high influx in the population is another reason for this decline. Australia’s population is, at present, growing 300% faster than China - we are adding a city the size of Canberra (in terms of population) every 12 to 18 months. When it comes to population growth we seem to be on the forefront for the developed world.
Another reason to worry is the decline in rental vacancy rates and this will hit its lowest point on the trajectory in 24-48 months across the east coast cities. Melbourne is currently at a low at 2% and it is estimated to go down even further at 1.5% within the next 12-24 months. Sydney, which has a slightly lower population growth than Melbourne is expected to go down to 1.5% within the next 2 years.
Damage control before its too late
Amidst all the trepidation and negativity, there is a silver lining. This gruesome economy is the perfect time for people to buy homes or investments. The life expectancy of an average Australian is between 82-84 years - which is higher than that of people from countries like the UK and US. This means that people are going to have less money to live off and for a longer period.
With low interest rates and falling real estate prices, it is the perfect time for young working professionals to take the plunge and invest in their first property, be it a home or investment.
The baby boomers, on the other hand, need to consider buying themselves a second or third home, to be more financially secure in the future.
Real estate is, by nature, credit-driven. Few people pay cash for land, homes, or commercial properties. So when credit dries up, so does the demand for those assets. Falling demand means lower prices - which is where the economy is at right now, making it the perfect time to go property shopping. Reports indicate that house prices in Sydney and Melbourne have fallen nearly 14 per cent and 10 per cent from their respective peaks in July and November 2017, coinciding with low interest rates by the banks. Be smart, buy property for a more secure future and revitalize the economy by doing so.