Australian property values continue to soar northward, at after a predicted post COVID ‘slump’.

It’s been an exhilarating ride for homeowners but scary for those trying to break into the property market or upgrade.

Adelaide is the national capital leader with median house prices jumping 55.1% to $697,000 from March 2020 to October, 2023.

That’s compared to the national average of 35.9% and the capital city average of 31.2%.

Not even rocketing interest rates have been able to put the brakes on house prices.

The minor correction felt around the country was little more than a speed bump in Adelaide and prices have regained momentum with many predicting no end in sight.

So what is fuelling the fire?

And how can you not just avoid getting burnt but profit from the inferno?

What causes property price rises? 

There are a number of factors that have ignited Australia’s property market.

When COVID arrived on Australian shores in early 2020, the cash rate was just 0.25% and by November of that year, it hit an all-time low of 0.1%.

Money was virtually free.

People could borrow vast sums for next to nothing and they did.

Those rates didn’t begin their sharp climb towards the current level of 4.35% until May 2022.

It meant there was lots of money flying around the market.

But that alone was not the sole factor behind the boom.

The real driver now is basic economics – the lack of supply versus the excess demand.

Australia was already facing a housing shortage and that has been strained even more because of migration.

The Labor government has opened Australia’s doors under the guise of work shortages, with an estimated 500,000 people arriving in the country in the 12 months to September 2023.

And they all need somewhere to live!

The housing market cannot keep up with the demand.

That has in turn put pressure on the rental market sending rent prices through the roof as well.

Australia is also in the midst of an infrastructure boom pushing up the price of properties near major projects.

In Adelaide, this includes the North-South corridor and the Women’s and Children’s Hospital rebuild.

What to consider when buying property

Whether you are buying a home to live in or an investment property, there are many basic economic, demographic and market-specific factors to consider when looking for a property likely to increase in value.

These are the key drivers when considering Australian property values:

Supply and demand

It will always play a fundamental role in property prices.

High demand against a shortage of available properties is an auctioneer’s dream.

That demand is driven by migration patterns, population growth and urbanisation (when people in rural areas move to the cities).

It can only be offset by housing construction rates keeping up with demand.

Interest from overseas buyers and investors

There has always been significant interest from foreign investors in the Australian property market, particularly in desirable areas.

Given recent migration levels, that will continue to grow in the foreseeable future.

Foreign buyers are attracted by the Australian lifestyle and a stable economy, contributing to increased demand and higher prices, especially near good schools.

Interest rates

Some expected that rising interest rates would cause more people to put their properties on the market. That hasn’t been the case.

Typically when interest rates are low, buyers can afford to splash their cash, and that in turn stimulates demand for property and heats the market.

But increasing competition for property drives prices upwards, and that has proven to be a dominant force for the market to this point.

Economic conditions

Prevailing economic conditions and confidence in the economy will influence the housing market.

That primarily means employment rates but also includes consumer confidence and GDP growth.

A strong, stable economy tends to support the property market because people are more likely to have the ability and confidence to invest in property.

Infrastructure development

Big infrastructure development will have a positive effect on Australian property values  – particularly in areas that benefit most from those projects.

This includes things like new transport links and roads, shopping centres and public amenities such as suburban hubs and parks that increase the appeal of a suburb.

Government policies

Government policies like first-home buyer incentives and other home affordability measures tend to drive property prices up.

Keep an eye on tax policies and any other fiscal measures that might make home ownership more affordable.

Demographic trends

The dynamics of family living and household structures also plays a part.

A century ago, it was not unusual for 10 or more people to live in the same home.

Today, young independent people choose to live in their own spaces much earlier.

Older people like to remain in their own homes as long as possible too.

The trend towards smaller households increases the demand for properties.

While the desire for inner city urban living makes those type of properties more attractive and more expensive.

Land scarcity and zone regulations 

Limited availability of new land developments along with zoning regulations that restrict certain types of constructions can create scarcity in desirable areas.

This is a simple trick to pushing up Australian property values.

Historical performance

Positive historical performance, while holding no guarantees, is generally a solid indicator of likely future performance when it comes to particular suburbs or areas.

It creates the perception of a solid financial investment which generally attracts more buyers and lifts returns.

Renovation and gentrification

Both can trigger sharp rises in areas of all types.

Renovations in older, more established areas can refresh an already appealing suburb as older homes are demolished and replaced with newer, modern ones.

Gentrification in areas where property prices have traditionally been lower can lead to a rapid rise in interest and property values as higher-income residents and investors are attracted.

This holds particularly true for areas close to the CBD.

Get advice now

Property has long been a very solid investment.

But as with any investment, there are numerous economic factors that influence short and long-term returns.

Property markets are often cyclical and different regions within Australia may react independently to other regions, states and capitals.

Indeed, property values can differ just a few streets apart and from one weekend to the next.

Once you have landed the property of your dreams you’ll want to capitalise on your investment by securing the best possible loan.

That means the best rate as well as all the bells and whistles that suit your lifestyle.

That’s where Calder Finance Broking comes in.

CFB are specialists in the mortgage broking business.

Our commitment to you is this: We will not only prepare you for applying for a home loan, we will walk you through every step of the process, securing you the very best deal available.

We’ll also advise you on the most prudent mortgage strategies for your unique circumstances.

We pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to discuss all of your financial needs and concerns.

The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.

Written by David Titley from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.

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