There has been a lot of chatter about an “Australian property bubble.” But does ‘what goes up, must come tumbling down’ truly sum up what will happen to our real estate market in the future?
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One thing we will make clear is that you shouldn’t focus so much on the noise in the media and around you; first try to reach out to your property buyers agents, real estate agents, or your buyer’s advocate in whatever capacity they are to you. To find out the market situation and how to profit from it.
What would happen if the housing market were to dramatically decline over the next decade, and what are the implications? What kinds of social, political, and economic repercussions may we see if the government doesn’t take action?
Balancing the act in Investment Property
We as a nation have reached a critical juncture. Within the same decade as the biggest global financial disaster in modern history, we are living through a time that few could have imagined.
The remainder of the developed world is still digging itself out of the muck; some nations are just now beginning to make some economic advances, but the vast majority have yet to see any kind of real resuscitation. You can read about What Makes a Good Sydney Investment Property by clicking here.
In the meantime, Australia has seemingly pushed on with great vigour, powered by government policies meant to encourage our most important and culturally beloved commodity: housing.
When you think about it, the retail, industrial, and service industries, as well as key infrastructure, all rely heavily on the security of brick and mortar.
Because of its persistent reliability as an asset class, real estate is a good choice for those seeking diversified growth and stable income flow.
Human behaviour has a huge impact on and is felt strongly in the housing market. It has its own dynamics and responds to changes in the prices of other commodities, as was recently shown in the aftermath of the resource boom in Australia.
The upsurge in the price of commodities in the Sydney property market.
Outback specks grew into bustling communities very immediately as a result of China’s unexpected, voracious demand for our resources.
Some businesses rode the wave to great success while others, including infrastructure and house building, went into overdrive. Communities popped almost overnight as the mining monsoon swept mercilessly through Sydney, northern Queensland, the Northern Territory, and Western Australia.
The rapidity with which everything unfolded. Which is among the primary issues during every boom. When it moves too swiftly, leaving other industries in its behind, it becomes more of a speculative thrill ride and carries with it greater danger.
When a certain industry suddenly booms, like the resources industry did in the beginning, it might be difficult to get all the related markets to move in sync with one another.
Rather, they are supported by the unique economic, political, cultural, and social foundations of each country and market. For this reason, it is sometimes impossible to decipher their motivations, and they act on their own accord.
Are those bubbles bursting?
Some journalists and economists predicted real estate would crash and burn, while others said our resources industry will continue to develop at double-digit rates thanks to China’s economic boom far into the 2020s. You can also read about Xi Starts Third Term With GDP Showing China Economy in Doldrums by visiting https://www.bloomberg.com/news/articles/2022-10-24/china-economy-shows-mixed-recovery-as-industrial-activity-climbs
Foreign economists in particular have been ranting about housing bubbles for years, stating that the growth of our thriving real estate market was and is unsustainable.
There have been rumblings recently that the resources industry might eventually die out if China’s economy slows to a more sustainable level.
So how does this relate to homes?
Many other industries were left behind as a result of the government’s heavy dependence on the mining industry during the resources boom in order to protect Australia’s economy from the fallout of the global financial crisis.
Some people suffered as a result of the mining industry receiving a disproportionate share of resources, including building and infrastructure funding. Consider the retail industry as one example.
Regulators in Australia have put themselves in a precarious position by focusing too much on the residential real estate market to offset the decline in foreign investment in the country’s other major economic sectors.
But what other option do they have? Just think of the political mayhem that would ensue if the value of everyone’s home plummeted by 30-50% overnight.
The Reserve Bank and other government agencies are having a hard time responding to the current economic uncertainty since it has coincided with a moment of profound social change in the United States.
Though interest rates are now at historic lows, the number of seniors in America is rapidly increasing as the baby boomer generation passes the torch to their children, many of whom have different priorities in life than their parents had.
What would define the Great Australian Dream?
Our way of life is shifting. In the ’70s and ’80s, the baby boomer generation was the centre of attention since they were the ones who pushed an unprecedented amount of urban development in their pursuit of the perfect suburban McMansion and weren’t concerned by the drive to work.
Sprawling family houses rapidly became dazzling social status symbols as people prioritised the needs of their growing families over other concerns, such as a need for more indoor space or access to the outdoors.
As a new generation embraces the café culture and realises that expanding job opportunities in and around our major city centres are most easily accessible from “on trend” inner urban postcodes, rather than via congested major arterials, the importance of physical size has diminished in favour of location.
Furthermore, today’s kids aren’t as gung-ho about getting some fresh air and exercise as their parents might hope; they’d rather stay inside, fire up the iPad, and experience everything they want to in a virtual setting.
It seems natural that more of us would return to living in our main cities, given this is where the majority of Australia’s commercial diversity, employment possibilities, and well-established transport, health care, and education facilities can be found.
Given the much-maligned affordability concerns surrounding areas like inner-city Sydney and Melbourne, it’s hard to determine whether our obsession with urban life will continue in the same fashion.
Affordable housing is a social good
In Australia, housing was formerly a marker of social standing, with the Great Australian Dream resonating as a beacon of hope for post-Depression baby boomers. The result would be an increased impetus for economic revival.
As the baby boomer generation passes the torch to Generations X and Y, there has been a noticeable cultural shift in how and where people choose to live.
However, many baby boomers had already begun to shift their views on the property from that of a ‘family’ home in the suburbs to that of a traded commodity in their investment portfolio that could assist support their coming retirement before this happened.
By allowing people to use the equity in their “family home” to buy other properties, baby boomers may have left us with the most lasting change to the way we see and interact with real estate.
These days, dollar signs and bank balances take precedence over sentimental notions of establishing a permanent residence for one’s family.
Consider the fact that in December of last year, investor-related property financing accounted for a record 41% of all loans.
While it’s not simple to see where our love affair with real estate is headed, there are a few telltale signs that can help us get a sense of the future of our housing markets.
It all starts with the passing of the economic and social baton from the baby boomer generation to the next.
Since more and more young people, especially in ‘expensive’ inner city locations where purchasing brick and mortar is becoming increasingly difficult, are opting to rent instead of buy, the rental market is seeing both growth and expansion.
Lower- and middle-class families are becoming less likely to view homeownership as a ‘dream’ that is within reach, while higher-income earners are increasingly viewing property as a marketable, tax-effective commodity.
If the market is changing, now is the moment to be more strategic than ever with your spending, increase your return on investment, and plot out your long-term goals. Keep your wits about you and your self-assurance intact.
As of 2022 and beyond, according to reports by prominent buyer’s agents and real estate agents, it is expected that the Sydney property market would rise by 7-11%. Property Managers have also predicted a 4% increase, even in a less-than-ideal scenario. Rents have fallen in several suburbs, although overall price increase has been rather stable.
To know the best timing for the right property in the Sydney property market, and when to take the best opportunity in property purchase, our Sydney buyer’s agent recommends that you follow the right approach for your dream property. Contact the best buyers agency in Sydney for the best results.
At buyers agency Sydney, we always have the interest of our clients at the centre of our operations. Working with our experts at Buyers Agency Sydney, you can rest assured you are getting the best deals.