While we often talk about the Australian property market as a single entity, it is actually many smaller local markets. This is especially obvious right now, with property performance varying greatly across the country. But reporting market activity at a national level makes it easier to understand and helps us identify broad trends.
Similarly, while we often identify a single driver of property market movements, it is almost always more complex than that. In fact, at any given time, there is a wide range of factors affecting the real estate market. And, for strong growth to occur, several of these need to come together to stimulate buyers and drive up prices.
Here we look at the 5 biggest factors affecting real estate market performance right now.
This is probably the most talked about factor affecting the real estate market – particularly at the moment. To put it simply, the easier it is to get finance, the more active buyers will be. And the more active buyers are, the more competitive the market is, and the higher prices rise.
Similarly, the lower interest rates are, the less a mortgage costs, and the more buyers can borrow. And the more a buyer can borrow, the more they can spend to secure the property they want.
Before they can even think about a mortgage, buyers first need to be in a financial position to purchase property. This usually means receiving enough income from a stable source to allow them to service a loan. It also generally means having a reasonable amount in savings, which can be used as a deposit.
As such, the more the average person earns, the better positioned they will be to buy property. And, if they believe the economy is strong, they will be more willing to spend their money. So, if average wages are increasing and consumer confidence is high, the property market will usually perform well.
A property is only worth as much as buyers are willing to pay for it. And while most buyers may be willing to pay more to get the property they want, there is a limit. That is why, after periods of sustained growth, you tend to see fewer people actively looking to buy.
This is happening in some parts of the country right now, with many buyers simply priced out of the market. And, instead of settling for an unsuitable property or a different location, they are choosing to wait until prices drop. This is reducing the competition for individual properties and ultimately contributing to the softening growth numbers.
As more people move to an area, the local property market becomes more competitive, and prices usually increase. Conversely, if an area’s population is shrinking, there will be more properties available and fewer buyers competing for them. As such, population change can be a significant factor affecting real estate market performance.
Similarly, the type of buyers looking in an area can affect the performance of different property types. For example, if an area becomes popular with young families, the freestanding house market will likely become quite competitive. But if students and young professionals are the main demographic, higher density developments will usually perform better.
The availability of properties for sale can also be a major factor affecting real estate market performance. If sale listings are in short supply, even a modest amount of competition can drive up prices. But if the market is flooded with properties for sale, buyers have choice and can often negotiate a better deal.
This is something we are seeing play out across the country right now. In places like Brisbane and Adelaide, new sale listings continue to be limited, and price growth remains strong. However, in Sydney and Melbourne, listing volumes have largely returned to normal, and price growth has stagnated.
If you would like to learn more about the factors affecting real estate market performance, contact Search Party Property. Our team of property market experts understand how to read the market, identify trends, and forecast future movements. And they are always happy to share their insight and help you decide the next step on your investment journey.
For more information on how we can help you achieve your investment goals, book your free Property Investor Assessment session today.