No Comments

A win for Australian property investment

The recent election ‘upset’ in Australia is expected to provide a much needed boost to the country’s housing market, spiking a rise in interest for Australia property investment.

(UPDATED 11/6/19)

Australians went to the ballot box just last month. Few were expecting the Coalition party to remain in power — all polls run before the federal election had indicated that the Labor opposition would take over the government. However, Scott Morrison and his party ultimately managed to snatch victory out of the opposition’s jaws in what even he himself termed “a miracle”.

Before the elections, there had been a dark cloud of uncertainty hanging over house prices due to Labor’s proposed changes to negative gearing and capital gains tax (CGT). The changes, while a bid to improve housing affordability for first home buyers, added to the uncertainty in the Australian housing market.

If Labor’s housing policy was implemented, this would have led house prices to slide further, says Nerida Conisbee, chief economist of REA Group. With the Coalition’s win, the markets, particularly Melbourne and Sydney, are closer to bottoming out. The Property Council of Australia said the election results showed voters had “rejected risky taxation changes at such an uncertain time in the property cycle”.

The interest rate cut and banks loosening the grip on lending restrictions are also positive signs for the housing market.

Australia’s interest rates are now at a record low of 1.25%, after being previously on hold for almost three years. The Australian economy has seen slow growth during that period, mainly due to weak household income and spending growth.

Philip Lowe, the central bank Governor, said, “We are not expecting a quick turnaround in growth in consumer spending, but we are expecting a gradual improvement.”

Australia’s financial regulator APRA is loosening requirements for banks and other lenders, which will lead to increased borrowing capacity for people taking out a mortgage.

With house prices and the exchange rate at a low, the housing market in Australia is ripe for investment. Right before the elections, the Australian dollar reached its lowest levels in almost four years, bottoming out at a cool MYR 2.87.

This presents an opportunity for international investors to enter the market before prices start to rise again.

Where to invest?

READ  Victoria Smashes NSW for the Second Time in a Row

Of all the Australian states, the population of Victoria is rising the fastest. Its capital, Melbourne, is set to reach a grand total of 6 million people by 2026, and overtake Sydney as Australia’s most populated city.

New supply of housing in the city has not caught up with population growth, and we can foresee price and rentals rising as a result of increased demand.

Australia’s residential vacancy rate is the tightest it has been in years. Vacancy rates in Melbourne are on the low end at 1.8%, compared to Perth at 3.2%, Sydney at 3.4%, and Brisbane at 2.6%.

We can compare that with vacancy rates in KL, which dwarf that of Australia at an eye-watering 40%, making it difficult to expect any price and rental growth locally in the near future.

KL vs Melbourne vacancy rates

The sluggishness of the Malaysian market is driving many local investors to look overseas for property investment. The election result is good news for investors looking to Australia, and right now, the property market seems to be reaching the end of its correction period. Investors should pay close attention to the market to seek opportunities for Australia property investment.

The Australian property market is in for a rise, which means property investors can get better returns by buying now while the market is still low. Melbourne has been rated as APAC’s #1 investment destination — if you are interested to obtain great returns at lower risk, give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), email us at info@csiprop.com, or fill out the form below!

Register your Interest

Article by Ian Choong, Edits by Jagdeep Kaur & Vivienne Pal 

Sources:

  • Featured image from The Epoch Times
READ  Why Investors Must Buy Melbourne Property NOW Before 1 July 2017

Comments (0)