The economy has continued to correct itself following relatively low levels of activity for some time now, and experts are predicting that the housing market is on the verge of seeing a considerable upswing. Recent increases in real estate prices are seemingly here to last for the foreseeable future, in fact, prices are likely to increase further. As a result, demand is increasing steadily particularly in Sydney and Melbourne, and other cities will be following suit and potentially booming very soon.
Not surprisingly, investors are looking to pump more money into the housing market to take advantage of the opportunity. Because prices are almost certain to increase, it is an ideal time to buy, particularly for first home buyers that will find it much more difficult to afford the same properties when the market is running hot. These price increases can have negative effects too.
Sydney and Melbourne in particular might already be booming. The auction clearance rates are 90% and 80% respectively, so the wide majority of homes are being sold quite quickly and without too much trouble. In fact, house prices have increased by around 5%-6% in these cities over the past quarter, a fact that has economists worried that these increases will continue to rise at such a rapid rate.
While this is great for investors and other people who are thinking on how to start in real estate industry, it makes affording property much more difficult for the majority of the population. Plus, Australia’s house prices are amongst the highest in the world on average around 20% more expensive than overseas homes. So there are potentially big problems that could come from increased demand and higher prices in the future.
Why is it that Australian house prices are so much more expensive than they are in other countries? Some economists believe it to have to do with lifestyle, more than it has to do with investment. Australian people have aspirations to own property from a young age, despite feelings that more and more people rent until they have a well established career and are possibly starting a family. What this means is that we are more willing to part with large sums of money because owning a home is a lifestyle choice, as much as it is an investment. While an investor would look at the price purely from a financial point-of-view, the average Australian does not necessarily.
We will be closely watching the property market over the next few months; it will be interesting to see whether these huge levels of growth continue for the remainder of the year and into 2014.