Housing boom hits Australia

by Mark Benson on May 18, 2013

in Property in Australia

Housing boom hits Australia

Housing boom hits Australia

It will come as no surprise to learn that the Housing Industry Forecasting Group has increased its forecast for Australian new starts to the year-end June 2013. The last prediction was made in October 2012 with around 21,000 new builds expected although this figure has now been increased to 22,500. This is a 27% increase on the corresponding period last year and there are a number of reasons why the housing boom in Australia is set to continue.

Growing population

As we have covered in some of our recent articles, the population of Australia is growing dramatically and indeed the government is now looking at limiting this growth in the medium term. The ever-growing number of overseas skilled workers and other expats moving to Australia is having an impact upon long-term population trends with more and more families now having overseas connections.

In reality Australia has always had a relatively high overseas population due in the main to the history of the country. In many ways the economic growth of recent times has been partially due to the influx of skilled workers who have taken up opportunities across different business arenas. Indeed while many of the skilled workers initially moved to Australia on a short-term basis, more and more are now looking to move to Australia permanently.

Quote from AustraliaForum.com : “While the Australian property sector has performed relatively well over the last few years, often defying gravity against the difficult worldwide economic backdrop, there is no doubt that the performance of local property markets across Australia has varied enormously.Where are the property hotspots in Australia at this moment in time?”

Relatively low interest rates

The Australian economy has performed far better than its counterparts in Europe and North America in recent times and even though interest rates are higher than their overseas counterparts, they are still relatively low on an historic basis. Indeed the Reserve Bank of Australia recently reduced the Australian base rate by 0.25% which has brought down the cost of mortgages across-the-board.

The ongoing reduction in mortgage rates, which should continue in the short to medium term, coupled with economic prosperity and a relatively stable jobs market, has brought many more people into the first time property buyers grouping. As a consequence interest in new build properties continues to grow hence the reason why the forecast for new houses across Australia has been increased just recently.

Overseas interest

If we look back over recent times we see a number of countries that have become “safe havens” in the eyes of many international investors. While some have failed in the medium term, there is no doubt that Australia is still seen in this light. Time and time again we have seen sceptics calling the end to the Australian economic boom only for the economy to stabilise, move ahead and the unemployment rate remain near historic lows.

This environment has encouraged overseas investors to look towards Australian property, which has performed very differently from state to state, with many now looking to pick up “bargains” in the longer term.

Conclusion

When you take into account the so-called safe haven status many have pinned on Australia, the rising population, economic growth and a relatively strong employment market, it is not difficult to see why demand for new build properties is increasing. How long this will last remains to be seen but at this moment in time experts believe the property sector is in line for further growth with pent-up demand supporting this expectation in the short to medium term.

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