It often feels like Sydney’s popular Eastern beaches is a discrete property market, unaffected by domestic and international events – but we are part of a global economy and we’re subject to the demographic, economic and social changes of the world.
The property market can be affected by a surprising range of factors – with both positive and negative results.
1. The Aussie dollar
The Aussie dollar has been up in recent quarters, hitting a two-year high in September. There only seems to be limited correlation between Aussie dollar fluctuations and the property market: when the Aussie dollar goes down, for example, property prices don’t necessarily go down with it, especially not in Sydney. But a raised Aussie dollar could mean a dip in foreign investment, leaving more options for local buyers and easing some of the pressure on first home buyers.
2. Foreign investment
Part of the boom in Sydney in the last ten years has come from foreign investors, who buy one in five new properties. In August, China announced that it would restrict investment in foreign markets, which could lead to a drop in competition for local property.
However, other experts said that decreased investment from Chinese buyers would lead to a drop in supply, leaving the property market just as competitive as ever.
3. The Trump and Brexit wild cards
Australia’s economy is linked to international markets and is subject to the usual fluctuations in imports, exports, and stock trading.
Economists are uncertain as to the long-term influence of two major recent changes: the exit of Britain from the European Union, and the election of Donald Trump as President of the United States. We are already seeing a raised Aussie dollar against the Greenback, which could be down to uncertainty in the American market, while the ripple effects of Brexit will be seen in the future.
4. Changes in legislation
Closer to home, the State and Federal governments have both put forward a number of policies to address housing affordability. Current trends for investment could be affected by the Federal Opposition’s proposed changes to negative gearing, while the Federal Government’s policy for buyers to access their super for a deposit might lead to first home buyers finally getting on the property ladder.
5. Interest rates increases
We’ve become so used to low interest rates that many home buyers don’t remember a time when interest rates were high. But the latest RBA meeting suggested that an increase in interest rates could be right around the corner.
The RBA found that household debt was at an all-time high, implying that a rates increase could be on the cards to address this. First home buyers and those with greater mortgages would be most affected.
6. Supply and demand
Increased construction in desirable areas such as Sydney’s East will begin to meet the demands for more housing, allowing more options for savvy buyers. This is particularly good news for foreign investors, who are restricted to buying new or off-the-plan housing, and first home buyers, who are likely to seek smaller apartments as their first purchase.
7. Demographic and population trends
According to the latest census, one in five Australians is now aged over 65. In coming years, we’ll see the ageing population having an impact on demands for housing as older people look to downsize and long-held family homes become deceased estates. Downsizers are also more likely to be cash buyers.
All these factors may impact house prices – but as always, the best way to safeguard the value of your property is to buy in a secure location – and you can’t get much more secure than the Eastern suburbs.