How the local property market effects your home’s value


Whether you are looking to sell your existing house or buy a Perth investment property, you need to understand all local property market factors and how they affect property values.

Interest rates
Interest rates directly affect the property market. The higher the interest rate, the higher the cost of borrowing and the more expensive property becomes to buy, meaning less people are able to purchase. Conversely when rates drop, demand increases and so do prices. Currently, interest rates are low and pretty stable, which means more buyers in the market and more competition for properties, so it’s easier to sell your property at higher prices. Despite this current stability, there is growing uncertainty about where interest rates are headed, meaning many qualified buyers might be reluctant to purchase because of the risk factor.

Rising land values.
There is a finite amount of land, and in a built up area, diminishing available land leads to a rise in land values. Simple supply and demand. This will have a knock-on effect, leading to a rise in the prices of new homes, and consequently, second hand homes as well. Consumer confidence Confidence is king in so many ways and the housing market is no different. A drop in consumer confidence earlier this year spilled over into the economy, and housing prices in Australia’s’ capital cities, fell, albeit marginally, for the first time in more than a year. Some analysts attributed this fall to a natural cooling in property prices in the colder months, but most seem to agree it was more in line with the drop in consumer confidence. At the moment, there appears to be a wait-and-see mentality among consumers and homebuyers.

Household debt
Data from the Reserve Bank of Australia show Australians have accumulated excessive household debt, suggesting the current property bubble is in fact credit fuelled. Australia’s household debt to disposable income is one of the highest in the world. This could lead to an eventual credit crunch and a burst bubble.

Waiting for the bubble to burst
Australia’s house prices are amongst the highest in the world when compared to incomes. While it is generally accepted that Australia is still experiencing a property bubble, all bubbles burst eventually. Predicting when this will happen is impossible, you generally only know once it’s happened. The question, is do you ride the bubble, hoping it might still last a good few years, or do you wait for it burst and then purchase. Your call. Perth real estate is almost always a good investment, the important thing is not to expect immediate returns, but you should take a long range look at property investment. Study the market, look at trends and talk to the experts. This way you will at least make a completely informed decision on your next property investment.

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