Market Update

Stock remains low - gain access to the huge number of off-market properties where opportunities do exist

Investor confidence back in the Prestige market

Clovelly homeA buoyant stock market and purposeful government spending will ensure that the Prestige market does well from here. The signs are already robust and Sydney and Melbourne have come up with near-peak level Auction clearance rates over the last few months.

This has been nothing short of phenomenal for the Prestige market and augurs well for the entire real estate scene. The high-end market was hit extremely hard by recession in 2008 and it had slid to its rock bottom.

Since then, things have not come round the easy way for the ‘Prestige’ scene. It took a while before investor confidence was restored. After all, for a very long time, buyers were waiting for the prices to bottom out while sellers felt they were far from registering the right price. In such times, caution had certainly become the buzzword.

Chinese investors looking for safe haven away from Hongkong

These are more interesting times for sure. Domestic buyers have come back to the buying fold because they are pretty sure that the prices can hardly plateau further (just the perfect recipe for making purchases). China, at the crux moment, has provided a shot in the arm. Stressed out by the too-good-to-be-true growth of the Hongkong property market, it has shifted the property ownership legalities towards the more conservative side. This has caused Chinese investors to look for safe haven away from Hongkong. The ever so imminent Euro crisis has made them look beyond Switzerland and its vicinity. Needless to say that this has profited Australia immensely.

Government changing visa rules to woo Chinese investors

To benefit aptly from the influx of foreign investors, the Australian government has also changed various property policies. How does this sound for an example- Those foreigners who have property worth $5 million in Australia will be provided its citizenship without any discomfort (read red-tapism). The Australian government feels that fast-tracking the application for visa would do the trick.

Chinese investors may trigger the foreign investment wave

The government believes that about 700 Chinese families would be willing to take the Prestige market bait in Australia and it would dramatically change the ‘Prestige’ scene. After all, those blessed with the right kind of money won’t restrict themselves to buying just a property. They would definitely look for the ancillaries like furniture and cars. Also, they would engage in finding suitable educational facilities for their children in this country. The long and short of it all points towards a robust Prestige market, triggered by the inflow of foreign investors. However, if you try reading deeper, there are many other equally important factors just as well.

Investors eyeing expansion of the property investment portfolio

Investors are looking to further spread out their property portfolio. The sellers are quite willing to believe that it is not worth waiting for the utopian times of the past and the deals dished out to them today are not paltry by any means. One must hasten to add that it is still a time to be circumspect. While so much is going right, the investor move (barring China) hasn’t been that huge yet. Many Prestige houses are being eagerly gobbled by those families who are looking to upsize. But then- to reiterate- its families (owner-occupiers) and not investors who are making the beelines. It is only too well known that owner-occupiers can never turn the heat and eventually the investors will have to press on the accelerator.

Equity market is good but so is the property market today

Investors have shown great confidence in the equity market but they have also come to understand that a small sale of equity can result in a big purchase in the real estate market. Thus, they are quite willing to take that leap. The time is just right for them.

  • Government stance is ever so soft.
  • Federal elections round the corner just make it even more perfect.
  • Low interest rates are on the verge of getting even lower.
  • No budget surplus (the promised one) is in sight and the Federal budget has already read out a deficit to the tune of $19.4 billion.
  • The dollar might weaken thus propelling expat movement to Australia even further.

They look like fairly smart bullet points but it would be nice to elaborate on the last three of them.

Low interest rates are not a passing fad

Interest rates have been considerably low for a while and the trend has lasted longer than a fad. Already, the rates are down to 2.75% and low inflation offers a chance to the government to minimize the rates even further. Lower interest rates would mean that money would be available at a much lesser borrowing interest (First Home Buyers can fetch loans for 5%- can it get better?). This can help people enhance their asset base, if we keep concepts of Negative Gearing at bay for a little while.

However, while all this really sounds good, people may not be on a lookout to immediately soak up their borrowing capacity. Yes, the mortgage debts are at an appreciable low and creditworthiness is high but this is not amounting to more people looking for loans, despite the low-interest rate scene. To wrap, low interest rates can revive an economy, giving enough clues for sustainable growth. As a consequence, it can also help us meet our inflationary goals as a nation but has the low-interest climate been able to seduce investors in big numbers yet?

No budget surplus declared in the Federal budget

The federal budget has blown hot and cold over the property market. While they have assisted senior citizens who are willing to downsize (granny flats, grants and all) and haven’t read out any housing cuts, they haven’t declared any budget surplus either. This would mean that government would not have to squeeze the fiscal policies tighter in order to meet the demands of a budget surplus. Certainly a help to the Prestige market, one may infer.

Low inflation rate drawing expatriates back home for property investments

Very low inflation (some prefer to call it deflation) may result in a weakening dollar; while these squeezes are transient in nature (balance restoring measures), they may trigger expat-return in high numbers. Why would an Australian living away invest somewhere else when the real value for money is right here in their backyard? Of course, such a sequence of events would only materialize if the dollar actually weakens, rather than the theoretical assumptions.

Sydney and Melbourne show the way to the Prestige Market

The Prestige market is certainly moving in the right direction. Atleast, Sydney and Melbourne are showing very heartening signs. The road to a complete ‘Prestige’ recovery needed to begin from the S and M and in doing so; the market has given hope for a smart upswing in the other cities too. How far can we spread into the horizon will depend on the variety of factors mentioned above, and how well we keep them in our favour.