Source: LinkedIn – Frank Days
With so much focus by the media and the doomsayers on the inevitable property collapse, I thought it prudent to shed some facts on this murky issue.
Much has been made of the governments, both federal and state, efforts to make housing more affordable by tinkering with the free market with legislation. The reality is, no one, least of all politicians, is hoping these impositions achieve their desired outcome. After all, in order to make housing more affordable we really do need the bubble to burst, and this would be disastrous for anyone currently paying off a mortgage, investing in property, or managing a SMSF.
The most ridiculous part of all the changes that have been implemented is the fact it absolutely discourages investors from buying off the plan property, and this group are one of the main drivers to new properties being built. And we need these new properties to cope with continuing interstate and international migration into Victoria, and more specifically the greater Melbourne area.
According to the Bureau of Statistics we have grown from 3.85 million in 2011 to 4.82 million in 2017, a 25% increase in just 6 years. Planning Victoria produced a report in 2016, which has predicted that the greater Melbourne area will be home to more than 8 million by 2031. I actually believe it will be sooner than this as many of those now migrating to Melbourne typically have more children than Peter Costellos’ “one for mum, one for dad, and one for the country” nirvana.
The fact that Melbourne won the worlds most liveable city for the 7th year running in 2017 will ensure that migration continues to grow from both international and domestic channels, and continued investment by big business. With this growth comes increased demand for property both as personal place of residence and investment as the demand for rental properties increase.
This ongoing growth will continue to put pressure on government to release more land and the capacity for first home buyers to purchase the great Australian dream in suburbs they desire will dissipate as the city limits get pushed further and further North, West and East. For many, the solution is to look to apartment living and we are rapidly coming to accept that this is the way of the future.
And the best developers have recognised this.
We are seeing top developers like Tim Gurner opting to break away from the investor centric stock and are investing in providing options that offer location, size, quality fittings and amenities that will attract the most discerning buyers. This foresight is attracting down-sizers and young professionals who demand the quality and location that meet their lifestyle needs, as well as investors who understand that providing a quality product in a central location will guarantee ongoing yields along with consistent capital growth.
Today it was announced a large group of projects approved for Fishermans Bend have had their approvals suspended until such time that new legislation has been considered and implemented mid-year. Actions like this will impact supply in 2 – 5 years time, and in particular supply to the rental market.
The introduction of new rules and regulations by APRA will impact some investors’ ability to borrow. This will impact the rental market.
The introduction by both our government and the Chinese government to hamper international purchasers, in particular Chinese purchasers, will impact the purchase of investment stock. This will impact the rental market.
So yes, we may endure an adjustment in price growth as we all adjust to these new times, but the market is cyclical by nature and this is just part of that cycle. And don’t forget, within the “market” there are “sub-markets” which all enjoy different peaks and troughs so there are always opportunities.
My prediction is Melbourne may see slower growth and potentially a minor adjustment in the short term, and for the canny investor this will mean real opportunity over the next 2 years. The key will be in obtaining professional advice by trusted advisors and completing your due diligence. As Warren Buffett says, when everyone else is selling, you should be buying!
If you wish to speak to anyone in regards to property let me know, I have a network of trusted advisors I have personally vetted.