A drop in value not all doom and gloom for the Australian property market

2018 has been a volatile year for property prices with the east coast of Australia, particularly Sydney and Melbourne, being the most affected.

Sydney property prices are amongst some of the sharpest falls in the country in 2018. Property insights provider CoreLogic, claims that the capital’s prices have fallen by 6.1%.  With reversals as steep as what we’ve witnessed this year, experts are going as far as stating that we’re heading for an overall property market crash, rather than a market correction.

 

The Role of the Banking Royal Commission

Following the inquiry into the banking sector of Australia and the criminal proceedings that followed, banks have tightened the purse strings and are making it much more difficult for Australians (and foreign investors) to take out loans to purchase property. This new stringency coupled with Sydney and Melbourne’s already over-inflated prices have created a reduction in demand, hence driving down the overall price of property.

nice house on sunny day

Population Boom

But its not all doom and gloom! Based on current population trends, Melbourne is expected to reach 8 million people by 2037, surpassing Sydney as Australia’s largest city by 2026. Prominent Melbourne Developer David Tricarico  “What we have started to see in Sydney and Melbourne over the past 8 or so years is not a property bubble fuelled by excess and greed or lax regulation, but rather a global recognition of the intangible qualities Australia possesses.” If this is the case, expect the population growth figures to be reached much sooner.

Melbourne and Sydney are being held in the same regard as London, Tokyo, and Munich as global megacities with a reputation for an exceptional quality of life. With air travel becoming much more affordable and accessible, more and more visitors will make their way down under and not want to return home!

But with growth comes the need for investment in infrastructure to support it. The Victorian Government has already pledged $13 billion in spending to ease the pain and congestion, but that is only to reach current population demand. What happens when Melbourne’s population doubles as planned over the next decade? Further investment from local government and private enterprise is a must for Melbourne to continue to flourish.

As we continue to see Australia’s population grow and confidence return to the nation’s economy, we will continue to see the property sector show profound resilience. The current economic downturn can easily be attributed to changes in lending regulation and requirements, but as Australia’s wealth grows as well as it’s population, expect the property sector to continue to be the cornerstone of Australian investing.