11 Aug Why have property prices fallen (slightly)?

We all know by now that property prices have definitely softened especially in Sydney and Melbourne. Statistics released by Corelogic have confirmed that Melbourne has seen a drop of 3.5% from March 2020 and Sydney a loss of 1.7%.

But what factors have impacted property prices?

Unemployment
This is the major factor when people are required to borrow money from the bank to transact on property. Proving that you can afford to pay back the loan whilst unemployed may be a little hard.

Uncertainty/Sentiment 
Let’s face it, everyone likes certainty in their lives. Certainty brings comfort. People like comfort. Usually buying a property brings a lot of financial uncertainty. What if your repayments increase? What if incomes decrease? What if property prices fall even further? These uncertainties are what usually stop people from buying property. Some people that I know have put their plans to buy a property (investment or to live in) on hold until they have certainty around the economy, their jobs, and property prices etc. I believe that when there is certainty in these areas, this translates to paying premium for a property because more and more people are willing to buy.

While most people are putting their plans on hold, there are people out there still transacting on property to stay ahead of the curve.

Immigration 
Immigration has played a big part in the supply and demand for property. In 2019, there was net overseas migration of 210,700 people. Majority of people tend to migrate to the big capital cities Sydney and Melbourne where there are more jobs or opportunities. Whether they are skilled migrants or non-skilled (refugees) migrants, these people need somewhere to live. Due to the current travel bans in place, the government expects a 30% fall in net migration for 2020. But that doesn’t mean it’s all doom and gloom, it just means there is less competition right now and your are getting more value for your money.

Most of the time there are factors that impact the property market, even when prices are increasing. You would read about them in the media.

Recent events that come to mind are the Royal Commission into Banking and the most recent federal election (which seems like a lifetime ago) which threatened negative gearing on our investment properties, however most of the time they are short-lived. I’m not downplaying the importance of the pandemic we are facing now, but It will past as all things do.

When you look at property as a long-term strategy, then in 10 years time the challenges we are facing right now are only a distant memory.

“It’s not the situation, but whether we react negative or respond positive to the situation that is important.” – Zig Ziglar

Thank you for reading