Client Info Session Part 3
By Matthew Rosie
BREXIT- While it has had a significant impact to the share market and property prices in London, Australia remains largely unaffected. Remembering that it could be another 2 years before the UK actually leaves the EU, Australian economists predict expect little impact to Australian property prices. Others are suggesting that Australian ex-pats may return home if it becomes too difficult to work and travel in the EU (which would add to local demand for property).
With historically low interest rates, the property market continues to be a very attractive investment (as evidenced by the growth many cities have enjoyed of late). Talks of a property bubble in Sydney and Melbourne have been dampened but there continues to be clear evidence of a Two-tier housing market around the country.
APRA (the lending regulator) has instructed lenders to adjust their balance sheets to reduce the volume of investors pushing prices apart. The effects of which are starting to become evident. Whether this approach to a geographical problem (largely limited to Sydney and Melbourne) has been appropriate or overzealous is yet to be seen.
With regards to Foreign Investment, there's been a lot of media speculation telling us how the Chinese are pushing property prices up around the country. The government has responded with changes to the FIRB process (namely a $5k application fee) and some states have increased stamp duty. However I think the banks changes to foreign lending criteria (ie. NO LONGER LENDING) - a change that has been made independent of any government intervention - has had perhaps the most profound impact on property prices.
Lastly, with regards to the current political atmosphere here in Australia. While the Coalition has managed to retain power, it does so with a much smaller majority and will undoubtedly have their work cut out for them.
Any fears of Labor’s proposed changes to negative gearing have most likely passed but the uncertainty surrounding the stability of our government may stick around for a bit longer.
But, when we look at the fundamentals we have good reason to remain confident in Australian property:
- Historically low interest rates
- Global economy continues to grow (albeit at a lower than average pace)
- Australian economy continues to grow
- Australian population continues to grow
- Commodity prices appear to have stabilised
- Australia’s credit rating remains strong
- Financial markets remain volatile
So in summary, while the Australian property market as a whole may not experience some of the crazy growth seen in the past, the fundamentals would suggest we will continue to enjoy solid returns, AND, should the global and Australian economies improve, population growth will increase, wages should grow and demand should return and once again continue to push housing prices up.