With Australia’s real estate sector churning out record breaking figures, many are curious on what factors will cause our property bubble to eventually burst.
Considering the change in spending habits, shortage of building materials and just about everyone in the nation reevaluating the quality of their lifestyle, there’s simply not enough supply to meet the demand when it comes to our national property market. While this information isn’t exactly new to anyone, the exact sales figures over the course of the past year have managed to shock even the most experienced in the real estate industry.
With recent data released by Domain’s latest House Price Report indicating that Australia’s median house price has now soared past one million dollars on average, there’s usually a lot riding on making savvy financial decisions in the world of real estate. However, Australia’s property bubble could finally burst if any one of the three pillars that formed the initial boom were to be removed.
The Rise And Predicted Fall Of The National Property Bubble
The arrival of COVID-19 to Australian shores in early 2020 marked the perfect storm for the Australian property market, and sparked the three integral pillars that formed the national property bubble: record low interest rates, government stimulus packages, and a local market hungry to buy. Restrictions on international travel and social distancing measures also introduced a change in spending habits amongst buyers – many of whom funnelled these funds back into their savings, often to buy their first home.
While the numbers are starting to indicate that Australia may have already passed the peak of it’s real estate boom, industry experts believe that at least one of these three pillars need to change in order for the property bubble to well and truly burst.
Interest Rates – Arguably the biggest influencing factor of Australia’s property market is the current record low interest rates. However, with nowhere to go but up, many homeowners face the real possibility of paying thousands of dollars more per year purely based on the size of their mortgages, many of which were taken out to match increasing property prices. While the RBA has kept the cash rate on hold for now, interest rates are inevitably predicted to rise, with some forecasting this change for the second half of 2022.
Government Incentives – The federal government and Prime Minister Scott Morrison released a range of different grants earlier in the year to stimulate spending and keep our key sectors ticking over – one of which being the HomeBuilder Grant. While many of these have since been rolled back, a number of other government incentives and stimulus packages such as the First Home Buyers Grant and the Family Home Guarantee still exist, with no end in sight for the options that still remain open to applicants.
Buyer Demand – Although this pillar of the property bubble is considered to be the most unpredictable, the demand of buyers is a big influence on how much a property’s sale price can command, and how many properties are available on the market. With international borders slowly reopening and the looming threat of the Great Resignation, the pandemic has seen a change in values for many Australians, with some prospective buyers opting to bow out of the property game altogether after becoming disengaged with the current state of the market.
At its monetary policy meeting on February 1 2022 – the first of the new year – the Reserve Bank of Australia has decided to keep the cash rate at the record low figure of 0.1%, meaning no immediate hikes on interest rates. However, the RBA also announced that it will stop buying government bonds from February 10, thus ending additional monetary stimulus. While interest rates will still have to lift at some point in the not so distant future, this will more than likely set the wheels in motion for Australia’s property bubble to finally burst.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.
