Why this is not a property bubble

Is it a good time to buy or is the market too hot? This is the question we see buyers asking themselves every week and depending on which media outlet you read, there are conflicting reports as to the future direction of our property market. 

This is of no help if you are looking to make a decision to buy. On one hand; you can decide to sit on the sidelines hoping the market will slow, but it continues to grow until it’s suddenly out of reach, or you jump in only to realise a correction in the near future.

I think it’s wise to review what are the three main factors that really control the rise and fall of our property market.

Supply and Demand
The balance between supply and demand has always played a pivotal role in the rise and fall of property prices. When demand exceeds supply, then generally prices rise due to buyer competition. The Sunshine Coast and more broadley South East Queensland is receiving unprecedented demand from those relocating north over the border or those living within a CBD looking for a change in lifestyle as workplaces now adopt more remote working models.

Interest Rates
It’s likely that the Reserve Bank of Australia will keep interest rates at their current 0.25% or even lower in the coming years. With a sustained period of low interest rates in the future, serviceability on borrowings have never been cheaper. This means that in real terms, it’s often cheaper to buy then it is to rent. This drives renters into the buying market and further builds demand.

Household Income
The level of household income and the securing of employment plays a significant factor in property prices. As areas and regions attract larger employers they also offer and attract higher paid staff, as the average household income rises in areas, so do the property values. 

When you consider the three influencing factors above and how they also influence each other you can see that what we are seeing each week is NOT a symptom of a property bubble ready to burst. 

With many of our suburbs already experiencing growth of over 20% this year we believe that there is still so much value on offer in our market as it will no doubt continue to grow. With demand set to continue, interest rates remaining low and household incomes continuing to grow we can see that property prices will also continue to grow throughout 2021.

Opinion piece written by Dan Sowden

*The information contained in this article is general information only, not financial advice, and does not take into account your individual objectives, financial situation or needs.