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Australia is recovering from the recession brought about by COVID-19 and the property market is faring considerably well. You’d be forgiven for thinking that property is a sure thing based on recent results. It’s often talked about that property values double every seven years. But is that really the case?
What makes property prices rise and fall?
Many factors affect property prices, and the cyclical nature of the property market means it’s not a linear pathway of year-on-year growth.
Supply and demand
If there are not enough houses to meet demand, the price goes up. If demand drops off, house values may follow suit.
When interest rates are low, more people are interested in buying a house because home loan repayments will be less. The Reserve Bank expects rates to remain low for at least the next three years, which means we could see the current growth continue.
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Demographics are an essential consideration in property values. Knowing the makeup of households in the area and owning a home that caters to that demographic will help put your property in a growth position. Don’t forget that demographics can change over time, though.
The prioritisation of financial support, jobs and economic recovery has helped Australia recover well from the COVID recession. In normal times, property values may change due to a downturn. This could be a nationwide downturn or one that is localised to a state or region. When property prices increase, consumer confidence rises, which can flow into the economy.
COVID has led to other changes that will reflect in property prices as well. With the remote working boom comes a propensity to move out of the cities. Buyers are looking for houses in regional areas or even just swapping apartment living for a bit more space. Be aware that it’s possible for pockets within locations to not experience the same capital growth as other houses in the area.
Slow population growth usually decreases the demand for homes. The opposite has happened during the pandemic, with prices going up even though our population growth has slowed.
- Useful reading: Why is property still the best investment?
How will your property fare?
By choosing well, you can ensure your property’s value is in line with (or better than) the median price for immediate and surrounding suburbs. You also have some control over helping your property increase in value each year.
Make your home attractive to borrowers with good street appeal and a tidy interior. Spruce up the walls with paint and change light fixtures and door handles for a fresh look.
Prioritise renovations on parts of the house that will add the greatest value, such as kitchens and bathrooms. Consider buyer demographics for your area to guide the changes you make in your home.
- Useful reading: Renovation budget blow out – how to avoid
The property market is cyclical
Like most types of investments, you may need to hold onto a property for some time to ride out the highs and lows of the market. Time in the market may be the best thing to get the best capital growth from your property.
There’s much debate and disagreement about whether property buyers should expect a doubling of their property value every seven to ten years. While some argue that property moves in cycles of slowdown, slump, recovery, and boom, experts have great difficulty forecasting when one stage moves into the next or the exact top or bottom of a cycle.
The takeaway from this uncertainty is that you shouldn’t rely on waiting seven years to inform your decision to buy or sell. Know enough details to understand when it’s a good time to make a move, but don’t wait for confirmation of an exact time. It’s what you buy and how you add value that gives you the best chances of achieving long-term capital growth and wealth creation.
Our Yellow Brick Road mortgage brokers are happy to share their insight on your property’s value or any prospective purchases you’re considering. Get in touch today.