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“Despite being in the midst of one of the greatest social and economic challenges in recorded history, why is the real estate market in Australia performing so strongly?”
This is the question John McGrath is asking, and, as you might expect from the industry veteran, he’s prepared to posit some answers.
In the latest issue of the annual McGrath Report, the network founder has looked at the drivers he believes are behind the surge that’s propelled property prices skyward, even in the midst of ongoing pandemic-related economic uncertainty.
1. Record-low interest rates
“We have never seen money so cheap to borrow in this country and it’s looking like the current low rates are here to stay for years to come,” flagged Mr McGrath.
With interest rates predicted to maintain their current levels globally for the next five years, it’s clear to Mr McGrath that first home buyers, upgraders and investors aren’t sleeping on the opportunity.
2. Seeking stability in uncertain times
Mr McGrath recognises that the story of Australia’s strong real estate market is not just one of economic factors. There are human emotions motivating the emerging trends, too.
“Most Australians seek the comfort and safety of bricks and mortar in difficult times,” Mr McGrath noted.
Whether making upgrades or purchasing an investment, many Australians are seeking peace of mind through their property journey.
“The sleep-at-night factor that property delivers combined with the aforementioned cheap money has driven millions of Australians to invest or invest further in residential property,” he said.
3. Demand outpacing supply
It’s no secret that low stock levels are driving prices up. Mr McGrath predicts this might persist for a while.
He said: “Until we see a return to a more normalised level of properties for sale, we will continue to see overweight demand pushing prices higher.”
This set of circumstances is creating something of a double-edged sword among those looking to trade their existing property for something new, according to the founder.
“With record-high prices, many sellers are fearful of getting out of the market before their next destination is found. So, with everyone waiting for their dream home to come along before they go to market, we find ourselves in an unusually low listing environment,” he said.
4. FOMO
The last factor driving growth, from Mr McGrath’s point of view, is an all-too-familiar social anxiety: fear of missing out.
“When a sharemarket or property market runs like this, we usually see a large amount of FOMO,” Mr McGrath said. He’s witnessing many buyers motivated by the concern that while all their friends are buying or upgrading, they’re being left out of the gold rush.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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