They say property is the safest investment you can ever make. Stocks and shares can fluctuate wildly and never recover. This requires pure guesswork or a shrewd eye as to know when to cash out. Many people see stocks and shares as a form of gambling.
If, instead, you decide to place your money into a bank, interest rates are at record lows across the whole world. Therefore your money will stay stagnant, even losing value in the long term.
Property has always been a much more sound investment than both of these options. So what happened to the Australia housing market in 2019? And does this mean you should reconsider investing in property or get a mortgage?
Here is our advice about the housing market Australia.
The Political Situation
An uncertain political situation and unexpected results tend to have a negative impact on the economy. At the last election, Bill Shorten’s Labor were expected to oust the Liberal alliance from power.
Their manifesto promised sweeping changes to taxation and more controls over the market. The Liberals were seen as pro-market and less interventionist. They were more keen to assist first-time buyers rather than intervening in the market itself.
The markets, based on the speculation of investors, were acting on the assumption of a Labor win and so the unexpected victory of the Liberals under Scott Morrison have potentially caused some disruption in the market.
Most commentators believe the housing market is now at the bottom. They argue it will recover. However, they are skeptical that the changes proposed by the Liberal government will help the market to recover quicker.
The proposed changes make it easier for people to get a mortgage and for first-time buyers to buy into the market, however, will mean there is more demand for housing, driving up the prices.
Everyone today wants to live in the city, especially young people. This is the place where life happens: where all the bars are and job opportunities are aplenty.
It is no surprise then that the picture in Melbourne and Sydney is different from the rest of the country. And population growth in these two cities may well help the market to recover more quickly in the city than in more rural areas.
As the population rises, demand for housing goes up and so the prices will increase. But those looking to invest in a home of their own will be able to borrow more money than ever before as the banking regulator loosens controls.
Buy In Now
It seems then that now is the right time to find yourself a good mortgage broker and buy into the housing market. This way you will buy a house and the price will slowly start to increase.
The value of the house may not increase as much as housing prices have done previously but the steady, incremental increase will ultimately work out a better financial decision than investing the money elsewhere.
The Long Term
There are many scare stories that this might not be the right time to invest in property but if you are considering getting a mortgage to buy your first home then it is important to remember that this is a long term investment.
You might not wish to sell this home for ten, maybe even twenty years and so small-term fluctuations in the market should not be relevant to your decision making.
Looking at the long term trajectory of your investment in property and what the market might look like generally in the future is what you should be considering.
This might seem hard to predict and it is important to remember that we don’t know the future so we can’t know for sure. But when we look back in history the trajectory over the past 45 years has always been in a positive upwards trend with relatively short periods of downward growth.
The Ten Year Cycle
There were periods of negative growth around 1975 and then again in the late 80s and early 90s. There was also a crash in the late 2000s and this latest slowdown in the late 2010s.
From looking at this analysis then it seems that there is usually a slump every decade and if a property for you is a long term investment – the best way to make money – then you should easily be able to ride this out.
Gaming the Australia Housing Market
Property should always be a long term investment and thinking about it in those terms is the best way to making sure you succeed in the housing market Australia.
There is a risk that if you purchase a property with the intention of selling it on for a profit within two or three years the market may not have picked up as much as you would have liked or worse you might feel compelled to sell it for a loss. Instead, it is better to look at property as a ten or twenty-year investment plan.
It is clear from looking at historical data that the Australia housing market does tend to operate in cycles of around a decade but the overall trajectory is in a positive direction.
Be sure to also factor in the difference between the major cities when you are considering investing. Not only will it be more expensive to buy a property in Melbourne or Sydney but the investment cycle might be slightly different: growth and change in the big cities also happen more quickly so there may well be more factors outside your control.
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