Needle on Australia’s Property Market

Summary

• Australian property prices do not appear to simmer down anytime soon, posing a threat not only to potential buyers but also to those living on rent.
• Regional areas have observed house values increasing to more than double due to increased demand.
• Housing prices are not expected to take a breather as long as wages do not rise, and low interest rates remain.

The Australian housing property debacle is heating up yet again, based on concerns regarding future price hike. Housing prices in Australia have been on a steady increase, especially since last year. Experts believe that further property surge is on the way, bad news for most consumers who are already struggling to afford a house.

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What triggered the property market?

Fear of missing out seems to have set in grasping the minds of individuals, urging them to get into the housing markets as soon as possible. House buyers have taken the help of the Homebuilder grant to fulfil their lifelong dreams of owning a property. Record low interest rates have also played a part in encouraging buyers to take the leap.

However, the surge in prices has reached a stage where first time buyers are wondering whether it is a good time to enter the market or not. From what it appears, the housing market is currently a seller’s market, and many buyers are left searching the market for a suitable property.

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Regional Markets Ablaze with the Price Surge

Regional cities have exhibited a strong housing demand, even more than that observed in main cities. House values have more than doubled in the regional areas over the last 12 months owing to strong demand.

A surge in remote working provision during the pandemic can explain the rising demand for housing property in many regional areas. As cities went under a lockdown, people shifted back to regional cities, close to home, instead of migrating to main cities where their offices are located. Individuals also showed interest in properties located near the main cities, making it easier for them to commute as and when workspaces open.

Additionally, many of those who bought expensive luxury houses in the regional cities opted for properties near the beaches. These included destinations like Byron Bay, Suffolk Park and Lennox Heads.

The fear of missing out on buying these high-profile houses was another aspect that seems to play out in the background.

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Renting is Homeowners’ bliss, but tenants’ nightmare

Homeowners have found it easier to rent out property, instead of selling it. Many of these houseowners have utilised the rent earned in buying out their dream properties in regional locations. Additionally, lenders have gotten into the habit of bumping up the rent as prices surge, making it increasingly inconvenient for people living on rent to survive.

Many people living as tenants have had to leave the property behind after the owner increased the rent beyond what they could afford. This has led to the rapid shifting of houses among the people living on rent. Renting at a time of skyrocketing house prices means constantly being on the lookout for cheaper properties.

Thus, most people who must maintain a living on rent have been crowded out of the benefits that favourable government policies intended to bring about. Not only have high rents put pressure on these people, but also the lack of enough property to browse through has impacted the tenants in the worst way possible.

The Ramifications of Increased Prices and Rents

Experts suggest that housing prices are not expected to take a breather anytime soon. This comes under the pressure of record-low interest rates looming in the background. This pressure is further increased given the fact that real wages are not increasing as rapidly as housing prices.

According to some studies, the gap between household income and the cost of housing has only increased over the years. This means that many individuals are already living in houses that are worth a lot more than what they can afford.

This points to the current price surge being a double-edged sword hurting both the lenders and tenants. Most homeowners who have rented out their houses are already under the pressure of high mortgage payments, even with low interest rates. This mortgage debt could pile up over the years and would be especially problematic when interest rates rise in the future. Thus, it would not be wrong to assume that many of the currently employed folks would retire with a huge amount of debt on their shoulders.

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Is there a possibility of a more equitable distribution of property?

Despite the rising housing demand, there is a subsequent rise in those living on rent which has not been paid much attention to. The rising number of people living on rent may not be a big problem in the current period. However, its implications would be much deeply apparent in the years to come.

Those living on rent know that not only they would not be able to afford a house in the coming few years, but also their future generations could face a problem in becoming homeowners. While those unable to afford a house for themselves scramble to find a property more suited to their needs, lenders come out as the primary gainers from record-low interest rates.

As employment figures take a positive turn, hopes resurface about the possibility of growing wages and more equitable distribution of property. Australian property sector may surprise experts, as was seen in the nation’s growth trajectory.