It’s always worth looking at where things are headed and what that means for Australian property and what might be the secret to a successful real estate year in 2010?
There are so many comments in the World like “what goes up must come down, take the good with the bad, steady as it goes, slowly but surely” and so the list goes on. These sayings are helpful in keeping context. They are also useful in pointing out the need for strong and solid foundations in growing sustainably for the long term. These are all useful things to keep in mind when considering what the coming year might bring.
Most of the “experts” in 2007 and 2008 completely missed the Global Financial Crisis. In many ways they proved to be as reliable as the weather forecast on my iPhone, which can be wrong by as much as 10 degrees celcius on any given day. It is therefore valuable to look at the facts and interpret them sensibly and carefully.
Australia has performed very well in the last 12 months, in fact better than any other OECD country. So can we expect that to continue without end? Can we expect property prices and rents to continue to endlessly increase in Australia? A sensible and careful answer would be that Australia has performed better than most countries but to expect this to continue and take this for granted would be ill advised.
As interest rates increase so too will the rate of mortgage stress – many people have bought homes whilst interest rates have been low and have planned poorly for rate hikes. The number of new home sales in Australia has decreased as interest rates have risen and the number of job advertisements has also decreased. Inflation is also on the rise which should keep pressure on the Reserve Bank to lift rates further.
This in no way should be taken as cause for alarm but should be considered in the context of a slow and sustainable recovery. Australia has not fallen apart as a nation and there are not millions of people out of work, however we are part of the World community, much of which is still hurting.
Australian property will without doubt perform well in the next decade however growth in both prices and rents will be at a lower level than was experienced in the previous decade – limited by both credit and wages. There will be many opportunities to buy well with distressed vendors requiring quick sales and this will always benefit those willing and able to take full advantage.
I strongly believe that at the end of 2010 we will consider that it looked rather similar to 2009. There will be opportunities and some people will take them. The most important thing in 2010 is to keep a cool head and consider the facts carefully remembering if something sounds too good to be true then it probably isn’t true at all.