What drives property prices up?

JOBS

The availability of employment is inextricably linked to the property market, because without a job it’s pretty difficult to pay a mortgage.

Mining towns in Western Australia, and to a lesser extent in Perth, are the perfect example. When there were loads of high-paying jobs available, house prices and rents went through the roof. As the boom came off the boil, so too did the housing market.

This also explains why Sydney and Melbourne have been our strongest markets historically, as these cities are where the headquarters of banks, media outlets and other corporate giants are located.

INFRASCTUCTURE

Roads, public transport, schools and hospitals, community centres, places of worship, parks and green corridors are all essential services, and where they are lacking the housing market tends to reflect this.

Suburbs that have thriving retail precincts, award-winning cafes and bespoke cinemas yield better price growth than those whose where biggest attraction is a McDonalds or supermarket.

POPULATION

It’s the basic economics of supply and demand. If there are more people competing for something, and limited stock, prices will rise. When there are more properties on the market than buyers, prices take a dive – just look at the issues with apartment oversupply in some of our cities.

DEMOGRAPHICS

The demographic profile of a suburb is another key factor in driving not only property prices, but also development and the composition of the housing stock. Some suburbs have more homeowners than renters, while others are majority investment-owned.

Household income and size is important too. All these factors impact desirability and competition, and in turn, property values. But remember, demographics aren’t set in stone and communities are constantly evolving.

NEW HOUSING

While population growth, demographics and jobs drive higher demand for housing in certain areas, there are also factors which stimulate the building on new homes.

It could be that demand for big blocks has decreased, and buyers are not keen to renovate older homes, prompting developers to knock down post-war three-bedders and build four townhouses on the site. Or perhaps a new university campus nearby means a block of one- and two-bedroom apartments makes more sense.

*source Property Update

Posted in Buy on 26th September, 2019