With interesting decisions and data surrounding the different Australian real-estate markets, it appears there could be some activity that is not in the best interest of Australian’s.
Sydney has shown great increase in the last few years, with 13% improvement from just last year. The property valuation Sydney has seen prices consistently increase, creating potential for international investors. As you’ll read below, this has opened up some interesting conflicts among real-estate, banking, and political leaders.
While other cities have seen increase, Perth has clearly shown decrease. With a property valuation Perth consistently decreasing, down 8% from last year. One of the reasons this city is struggling is due to lack of interest from foreign investors. Due to this decrease, many are using the real-estate environment of Perth to support the argument of a nationwide housing bubble.
In the last five years Sydney prices have soared 73%, making it the second most expensive housing market in the world, just behind Hong Kong. Melbourne has increased 52% over the last 5 years as well. Sydney has sustained construction of new homes while at the same time the state continues to pour funds into infrastructure investments. The result is a lopsided economy, with two-thirds of the nation’s economic growth occurring in Sydney and Melbourne.
While Perth continues to suffer, these facts have spurred conversation about how to adjust and correct the imbalance. With some suggesting the central bank adjust rates by region, putting Sydney at 3.75%, Melbourne 2.25%, and Perth to 0.5%. Setting this regional interest rate would naturally encourage investment and growth in stagnant regions.
Chinese Investors are causing concern in the Australian housing market conversation. It was estimated recently that nearly 70,000 residents sat empty due to Chinese land-bankers. These firms are buying up properties and leaving them empty, making them unavailable for purchase or rent. The result is increased demand, and increased prices. Recently, it has been suggested fines be imposed on properties being left empty for more than 12 months.
The concern comes in the face of staggering household debt, primarily due to higher mortgages. Also being affected is the ROI of rental properties. Over the last few years rental returns have consistently decreased, especially in Perth which used to be a “go to” market for investors.
Politicians and executives alike insist there is no housing bubble here in Australia. These arguments are supported by strong immigration coming from Asian countries. Given that Chinese investors are increasing their interest in Australian property, it is no surprise that immigration would accompany this trend. Also being cited as a reason for the sharp increase to home prices is the growth of Australia from the native citizenry. The population is increasing even without immigration.
However, the debt of Australians is alarmingly high, with the second highest of English speaking nations. With the majority of that debt being mortgages, it’s hard to believe the price increase is justified. Especially when considering that the four major banks have seemingly united their voices downplaying any notion of a housing bubble.
As with all things, extensive research is necessary before making a purchasing decision when it comes to anything to do with the Australian real-estate market. Some are saying the market is solid and improving, while others argue it is being manipulated. Either way, make sure to do your own due diligence.