Despite recent predictions of a bleak future for the housing market and the economy, circumstances are not as bad as they appear, according to the director of a national property advisory group.
Ken Raiss from Chan & Naylor said with inflation down and interest rates arbitrarily low, many Australians had more of everything compared to three decades before, including cars, relatively cheaper food, cheaper electronic goods, more affordable education and travel.
“Compared with 30 years ago we have more disposable income, which in part has led Australians to spend more on their homes,” he said.
With the actual cost of living coming down, many Australians now had a greater amount of disposable income to spend on desirable assets such as property.
“As is the case with any market that has experienced a cycle upswing, increased demand necessarily leads to reduced supply, and this may feel like a market squeeze but it is certainly no bubble. People have the money but are chasing an ever diminishing resource - this is classic economics 101,” Mr Raiss said.
Mr Raiss refuted the idea that the current property scarcity was due to cashed-up investors saying it was the result of decades of poor state and federal planning, which combined with diminished credit, had put property development on hold.
Consequently, limited supply had led to increased demand. However, Mr Raiss said he believed the property investment market had now turned.
“As we surpass the top of the previous cycle or are above the previous trough, we are now seeing the ill-informed chasing and overbidding on property market values because of fear of missing out,” said Mr Raiss.
“The alarmists are buying at any price, whereas the savvy investor has already made their purchase some time ago and is now looking to either spend appropriately on residential property which they can add value to, or maybe the stock market for their next investment growth opportunities.”
More property would inevitably become available, but for first home buyers and new property investors who feared they would miss out, Mr Raiss said they needed to lower their expectations and take the emotion out of buying property.
He added that Australians also needed to better educate themselves on the property market and maintain a ‘glass half full’ perspective.