How To

In an earlier article, we explored some of the ways in which government spending can have a positive effect upon local economies, and real estate markets. Using HMAS Stirling in Perth as a sort of case study, we also threw out a few ideas for how defence spending may be unique compared to other forms of government stimulus. Overall, local government spending is typically a positive sign for a property market – simple. But before you begin to anticipate growth in every region where a government is throwing money around, it’s vital to understand a few exceptions to the rule and be aware of how it can sometimes go wrong.

This is the ASX’s “30 Day Interbank Cash Rate Futures Implied Yield Curve”, and, as well as having an egregious word salad of a name, it can be a pretty useful tool for understanding what the RBA is likely to do with interest rates. How? Well, the key concept at play here is in the title – “futures”. Futures are a clever type of financial contract that can help to hedge against risk. To explain, let’s take a quick example: Imagine you're a farmer who grows apples. For a variety of reasons (say, new competitors, weather, anything really) you’re worried that when it's time to sell your apples in a few months, it looks like prices are going to be lower than normal, and you’re heading straight for a loss.

Everyone knows the old adage, “crime doesn’t pay”. But is it true for the property? And how much attention should property investors pay to crime rates? You might expect that fewer people want to live somewhere with a high crime rate, meaning high crime causes the property market to suffer. But this isn’t always the full story. A large body of academic research indicates an obvious causal relationship between property prices and crime, and some similar results have been identified here in Australia.

As of most recent mid-2022 figures, it was reported that Australia has “the third-highest house price-to-income ratio in the world” up at 8.5. Back in June 2001 this figure was just 4.5. In Tasmania, an average wage is currently enough to afford just 5% of homes, the lowest percentage of any state, though it isn’t a whole lot better elsewhere. According to a recent PropTrack report, even a six-figure income is enough to afford just 13% of homes, while a household income of $64,000 a year is enough for only 3%. Current forecasts indicate that these figures will continue to deteriorate.