October 04, 2017
By John Flavell, CEO Mortgage Choice
No-one really knows what the future will bring. As such, it’s impossible to predict what will happen tomorrow, let alone one year from now.
The best way to predict the future is to look at the past. And history has made one thing very clear: property is cyclical.
Any and every property market goes through highs and lows. There will be periods of strong growth and periods where property prices may fall.
History has also shown us what events can cause property prices to fall and what events can cause prices to rise.
What we have learned from history is that property prices are driven by four key factors: supply versus demand; the cost of credit; access to credit and overall employment levels.
At present, property demand remains relatively strong across the country. In Sydney and Melbourne specifically, the level of stock coming on to the market has fallen over the last 12 months. When you combine falling stock levels with clearance rates above 75%, it's clear that demand remains strong in both of the capital cities.
Furthermore, despite the latest spate of interest rate increases, home loan rates remain historically low, keeping the cost of credit at affordable levels.
And, while many of Australia’s lenders have tightened their lending policy over the last 12 months, they remain hungry for business in both the owner occupied and investor space – a trend that will continue for the foreseeable future.
Added to this, unemployment remains low by long-term standards. Data from the Australian Bureau of Statistics shows the unemployment rate has not risen above 6% once this calendar year. With all of this in mind, it's likely that property prices – especially in markets like Sydney and Melbourne will continue to rise. And that is one prediction that economists can hang their hat on.
Because this prediction is based on historical data, rather than expected trends.
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