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Strip It All Back, Here’s The Fundamentals Of Australian Property Markets

Strip It All Back, Here’s The Fundamentals Of Australian Property Markets
August 13, 2020 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Let’s all be honest: no one likes the coronavirus, it’s a crap sandwich. While glass-half-full folk like myself will always look for positives by pointing out the fresh bread, in this case it’s still a crap sandwich!

Frustration and fear are very powerful emotions. But they can often distort reality and cloud people’s judgement. The coronavirus is causing considerably more of this now than ever.

Beneath the emotion of every moment are the fundamentals.

Contrary to current emotions, many of today’s property market fundamentals are better than 3-years ago.

A quick but really effective exercise for anyone interested in real estate is to reflect back to this time 3-years ago and what subsequently unfolded.

Quite the opposite to right now, the general emotion in mid-2017 was one of confidence. The opinion of the majority was that Australian property markets (aka ‘Sydney and Melbourne’) were under-supplied and that there was no end in sight for real estate price rises.

But the consensus opinion back then was not endorsed by the fundamentals, as reported by Propertyology in August 2017. Over the next two years, Australia’s two biggest cities produced one of their biggest ever property market downturns.

Fast forward to now and the general emotion is one of uncertainty. The news-of-the-day is littered with commentary about high unemployment rates, border closures, a freeze on international migration, and that good-for-nothing phrase ‘fiscal cliff’.

Today’s intense emotions leave the consensus believing that it’s impossible for property prices do anything other than significantly decline.

Emotion, and a lack of understanding of market fundamentals, are reflected in much of the current day real estate commentary.

There are obviously a couple of key fundamentals today that aren’t good. But it’s the sum of all parts which makes the full picture. In many parts of Australia, that picture today is one of mostly sun with a few clouds.

No two property markets are the same. From city to city, the volume of new housing supply released into the market always varies widely, as illustrated below with some examples of two capital cities and two regional locations in four different states.

In addition to the all-time record low interest rates, the incredibly low volumes of supply right now in Australia is the most important fundamental in respect to cushioning property markets through this moment in time where social distancing controls are curtailing the earning capacity of many households.

As recently outlined by Propertyology, Australia’s rental supply hasn’t been as low as this for more than a decade and rents in large parts of Australia are set to soar. Contrary to the dominant theme of today’s tabloids, conditions as tight as this do not result in significant declines in real estate values.

Economic conditions have a significant influence on the demand side of the property market equation because it directly flows through to each individual’s capacity to pay for housing costs along with their level of confidence to transact in real estate.

Once again though, these conditions always vary widely from one part of Australia to another. One’s perception based on how they are personally feeling and / or the conditions within their home patch will always be in stark contrast to the reality elsewhere. One can’t possibly know what they don’t know!

In addition to analysing what the official data tells us, Propertyology’s buyer’s agents are engaging with people and stakeholders from different communities all over Australia every day. We are in the box seat for having an appreciation of conditions on the ground all over Australia.

The moral of this story for anyone who cares is to always be mindful of your own emotions and the general perception portrayed by society at a moment in time. Give yourself a clear head before making important decisions.

Simply go back and cast your eyes over the content within the four graphics in this blog. While this is by no means a detailed analysis, it is crystal clear that no two cities have the same conditions.

Park the emotion, ignore the consensus, look at what the fundamentals say.

Right here, right now, asset values and rents are rising in various parts of Australia. We can vouch for this because our buyer’s agents are amongst the action and negotiating outcomes for people. We found these locations in the first instance by focusing on the fundamentals, not society’s perceptions.

Propertyology is a multi-award-winning buyer’s agency and Australia’s premier property market analyst. Every capital city and every non-capital city, we analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

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