Skip to main content

Don’t listen to the naysayers, the fundamentals of Australia’s property market are still solid.

The Australian home loan market is one of the most robust in the world, and it has proven its resilience time and again. However, as interest rates in Australia have continued to rise, some people have been quick to some to assume that this will have a negative impact on property investment, and even that strength of the market as a whole may be waning.

However, the team at Propertyology – a property investment advisory firm that provides research-driven advice to property investors across Australia takes a different view and-has released research that indicates the market remains healthy.

According to Propertyology, the rising interest rates have had more of an impact on confidence than on finances. In most locations, the fundamentals of the property market remain incredibly strong, but buyer activity has reduced due to a lack of good quality, logical information.  Many people have been quick to jump to conclusions and assume the worst. The media has also been quick to amplify these ‘doom and gloom’ predictions to generate clicks.

The Australian Prudential Regulation Authority (APRA) supports Propertyology’s more positive view. Despite eight consecutive months of interest rate increases, APRA’s analysis shows that the home loan sector in Australia is as healthy as it has ever been. The majority of Australian households have also never been stronger financially and are coping with the increased interest rates.

As of the latest data release, the portion of loans with late repayments is sitting near record lows of 1.01%, with only 0.4% of loans being 30-89 days late on repayments. Additionally, the overall risk profile of the sector has improved, with fewer loans in the higher loan-to-value ratio (LVR) brackets.

Contrary to some concerns, there have been no signs of “distressed sales” or a significant increase in the number of people being forced to sell their homes due to financial difficulties. The volume of properties freshly listed for sale each month is very much in line with long-running averages.

The Australian property market has been a rollercoaster ride for investors in recent years.

However, Simon Pressley, founder of Propertyology, has stated that the market is showing signs of recovery, with improved buyer confidence and rising buyer volumes.

“We believe that the community is gradually gathering their composure and regaining their confidence in the property market. While the early rate hikes caused some concern, there are already signs of improved buyer confidence in the new year, despite further interest rate increases,” Presley states.

“Auction clearance rates are better this year than in the second half of 2022, and buyer volumes are rising,” he says, “despite the fears of some, we believe that the upward pressure on asset values will continue to increase as buyer confidence returns.”

And he has some good news for existing property investors:

“With the current shortage of housing supply in many parts of Australia, those who have already invested in property are likely to be the biggest winners when the market rebounds.”

Pressley’s optimistic outlook is supported by auction clearance rates, which are better in 2023 than they were in the second half of 2022.

Moreover, there are several other positive factors to consider when making property investment decisions that may have a favourable impact on the market for investors.

Millions of Australians have strong household balance sheets, and the tight labour market is putting strong upward pressure on wages. Additionally, the increase in immigration numbers is expected to add to the country’s housing demand, creating further opportunities for investors.

While rising interest rates may have caused some short-term uncertainty, the fundamentals of the market remain strong and the Australian community is regaining its confidence,. While caution is always advised, and property investment is a long-term game, for those considering investing now, there are several positive factors to consider before deciding.

Leave a Reply