What is going to shape the future of our cities?

What factors are going to make some locations and certain properties outperform the averages in the future?

There’s no doubt that the significant property price growth that we’ve enjoyed over the last couple of decades, particularly in our big capital cities, have come about because of two major factors:

  • Lower interest rates
  • Two income households

So, what’s ahead for the future?

Let’s now look at some trends that will shape the future of our property markets.

1. Lower interest rates

A long period of low interest rates. In fact, this is likely to be the case for up to a decade. That’s because the RBA will only increase interest rates if our economy flourishes, productivity increases, inflation rises and the value of our properties boom, so they want to slow things down by raising the cost of money.

2. Low wages growth

Wages growth is likely to remain low in the coming years, despite strong job creation and despite our world class low unemployment levels.

What this means is the average Australia is not going to be taking more money home in their pay packet and despite us being told that inflation is low, most people are not getting as much bang for their buck. It seems that after paying higher petrol prices, higher energy prices and the increased cost of living, they just don’t have as much money left over.

3. Major changes to the workplace ahead

Automation and artificial intelligence will take the place of many workers while offshoring of manufacturing will mean the jobs of many others will be made redundant.

A recent US study showed that 47% of existing jobs could be obsolete by 2030 and the demand for some 40% of the other remaining jobs are likely be halved over the next decade. Most of these job losses are expected in the higher and especially middle-income wage brackets. Similarly, in Australia research by StartupAUS suggests that technology “will kill 40% of Aussie jobs by 2030.”

Jobs in the hospitality and tourism, transport, retail and administration sectors in Australia are most at risk from technology and automation over the next 10 to 15 years, potentially putting the jobs of nearly five million workers on the chopping block.

Automation and artificial intelligence will take the place of many workers by 2030;

The impact on a property market

If the trends mentioned above occur, it’s very likely that future income growth will be lower in the outer suburbs of our capital cities meaning there will be limited opportunity for people to pay more for their homes there. And it will be much the same in many parts of regional Australia.

Fewer homeowners being able to afford to pay more means properties in those areas are unlikely to significantly increase in value. On the other hand, in those municipalities where wages growth is considerably higher than average, the local residents will have more disposable income than average.

What will drive property values?

Those areas where people will have job security, higher wages growth and multiple streams of income will be locations where people will be able to afford and also be prepared to pay more for their properties.

These will be the established you inner and middle ring suburbs of our capital cities, and in particular locations close to amenities, public transport and the lifestyle choices these more affluent Australians want to (and can afford to) enjoy. This is the type of property that will outperform in the future.

*source Property Update

Posted in Buy, Latest news, News, Sell on 4th July, 2019