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Australian Real Estate: Property Bubble or Buoyant Market?

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By - Tuesday 11 May 2010

Any investors with a keen eye will have noticed that Australia's property market has been enjoying significant price rises over the past few years. A rising population and lack of new builds is helping to ensure that the majority of individuals who purchased real estate in the country can now expect to enjoy significant returns.

But with property values already posting impressive growth so far this year and further rises predicted, there is a risk of the bubble bursting and prices tumbling.

Why has Australia experienced rapid growth?

The country's real estate values have been supported and pushed upwards rapidly thanks to its growing population, strong economy, low unemployment rate and shortage of affordable housing - which is estimated to reach the dizzy heights of 466,200 by 2020 if no action is taken to increase dwelling construction rates.

Furthermore, relatively low interest rates in the past have enabled individuals to enter into the property market and enjoy low-cost mortgage repayments.

What does the future hold?

Some experts are predicting that the Australian market is beginning to slow down. Australia's largest real estate group, Ray White, has predicted that rising interest rates and a reduction in mortgage lending could contribute towards a fall in property prices.

Furthermore, the troubles being experienced in the eurozone could have a knock-on effect on the property market down under. A spokesperson for SQM Research suggested that if the crisis in Europe worsens there could be the potential for quarter-on-quarter price falls towards the end of the year.

However, there is hope for the sector, as Residex chief executive John Edwards is confident that growth will continue at a moderate rate over the course of the year, with the expert forecasting increases of five to eight per cent overall, with the high end of the market performing strongly.

Government regulation for overseas investors

New government regulations on foreign buyers will give potential investors something to consider before buying property in the country.

The surging prices and increasing number of overseas buyers looking to capitalise on them has meant that new regulations have been introduced to control the system. It means that any temporary residents investing in real estate must gain permission and if they decide to leave Australia will be forced to sell their property.ADNFCR-3415-ID-19768095-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.


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