There are a raft of factors which point to a sustained resurgence in property prices and buyer activity. In any market, these would indicate a likelihood for growth.
But what makes the argument even more compelling is the fact that the reasons we identify for a growing market are in actual fact simply a reversal of the factors which caused the market to stop growing in the first place. Except this time there is a whole lot more fuel being thrown on the fire in the form of much lower interest rates:.
Here are the top reasons why we think the boom may be far from over
1. Affordability
For first home buyers the current state of the market represents a window of opportunity not seen for almost a decade. Lower house prices and record low rates makes buying look better than ever.
Consider this: Just 6 months ago, mortgage repayments on a $550,000 mortgage were some $400 a month higher (that’s almost 15%) than they are now.
Don’t also forget the government guarantee for first home buyers borrowing up to 95%.
2. Returns
Rental yields usually drop as rates do, with an influx of new supply dampening renter demand. But in this environment we see the perfect storm for investor activity with median rental returns in Sydney also increasing.
Consider this: An investor can borrow at 3.5%, rent their property out at 4.1% (median Sydney rental return) and claim tax losses for depreciation all the while seeing their property values increase.
On a $600,000 new property an investor paying 35% tax could own an investment, be paid almost $7,000 a year for the privilege and that’s not before reaping the capital gains.
3. Borrowing Power
A loosening of the assessment rate requirements by APRA now mean borrowers can afford more. More money in the pockets of buyers in an increasingly competitive market means one thing, bidders are now willing (and most importantly able) to offer more than they could have even a few weeks ago.
Consider this: A typical borrower with a maximum borrowing capacity of $500K last month can now qualify for a loan of just over $600K now. That’s an increase of 20% in just 1 month!
4. Consumer sentiment
The economy seems to be going OK. Take for instance that Australia has posted a current account surplus for the first time in 44 years.
We have stable government and while Scott Morrison isn’t everybody’s cup of tea, there does seem to be less scandal these days.
And don’t forget the tax cuts!
For more on this or to learn more about why we think Orchid Hill Wadalba is the best value land on the Central Coast, call Chris White on 0400 247 741.
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