Australia property market cycles have traditionally lasted about seven years peak to peak. Overall, prices have risen, after a stalling during 2004, until middle of 2008. Some property market commentators believe the growth in the Australian market has caused property to be overpriced, which might be the case compared to wage growth, but demand in the Australia property market still outstrips supply. The following will assist you decide if the Australia property market should be part of your investment objectives:

1.

The Australian property market is not following the declining trends seen in many markets around the world. During the June to August 2009 period, prices actually rose by 3.7%. Perth was the only capital city not to experience average price increases. Of these capital cities, Melbourne had the highest increase at 6.1%, while Sydney and Canberra showed gains of 3.6% and 4.8% respectively.

Source: Index Mundi / International Monetary Fund

2.

The Australia property market is attractive to Australian investors. However, the global financial climate and economic downturn have had a dramatic effect on sentiment in the residential and commercial property markets in Australia.

As per the chart, the Australian economy has grown consistently by 3-4% over the last 6 years. According to the Austrian Bureau of Statistics, GDP grew 0.6% over the 2008-2009 period. For 2009-2013, the EIU predicts the average GDP growth to be 2.4%, down from an average 3.3% between 2003 and 2007. House prices falls, tumbling international commodity prices, heightened turmoil in global financial markets and inflation are all forces which could have a negative impact on the Australian economy.

Currently there is still a shortage of housing stock in the Australia property market compared to demand. This, along with the low unemployment level, are positive aspects for maintaining a strong rental market. Australia is also experiencing population growth via net immigration, which is another support for demand in the rental market.

At the moment interest rates in Australia remain static. This is predicted to last one month, as the Reserve Bank of Australia announced they will be increasing interest rates. This will therefore discourage buyers from investing in Australia real estate. By February 2011 if interest rates get as high as the levels anticipated by the financial markets (7.98 per cent), the same first home buyer would be paying $1,978/month or an additional $100/week. 

Foreign ownership in the Australia property market is permitted and can be within the different property sectors of i) residential real estate, ii) commercial real estate and iii) property investment

All foreign investment in the Australian property market requires approval from the Foreign Investment Review Board (FIRB). This investment authority is in place to protect Australian citizens while at the same time allowing investment which benefits communities within Australia. For example, foreign investment is allowed in new developments provided that it does not exceed 50% of any one development.

Australia's quality of living is one aspect that appeals to many international investors and entrepreneurs interested in investing in, or migrating to Australia. Mercer Human Resource Consulting ranked Sydney, Melbourne and Perth in the top 5 cities within the Asia Pacific for living standards in its 2009 Quality of Living Survey. Sydney was ranked 10th out of 215 cities globally, Melbourne and Perth ranked 18th and 21st respectively.

The surplus of demand is contributing to price increases in the Australian property market; however, this is not the sole explanation. It is more likely explained by a combination of attractive first home buyer grants from the government, low interest rates and poorly performing share markets along with the tight rental markets seen in most of the cities.

According to the 2009-2012 Residential Property Prospects report by BIS Shrapnel, average house prices in the Australia property market are forecast to rise as much as 22%. Among the capital cities, Sydney, Melbourne and Adelaide are forecast to show the strongest price growth at 19% over the next three years.

The current economic environment has caused banks to tighten lending criteria, making obtaining finance to support investment in the Australia property market more difficult. Healy Consultants assists clients obtain property finance suitable for their requirements. In sourcing mortgages, Healy Consultants works with leading international banks including Commonwealth Bank, ANZ Bank, DBS Bank and OCBC Bank.

Taxes are payable when buying Australia property and selling Australia property. Healy Consultants assist clients with professional advice on accounting and tax matters related to the Australian property market to ensure their tax obligations are met efficiently.

Healy Consultants independently assists international property investors manage all requirements for purchasing or selling in the Australia property market. Our firm draws upon the latest residential and commercial property market information to provide up-to-date analysis on a broad range of areas including i) Australia property cycles ii) current sentiment and future outlook for Australia real estate and iii) interest rate and currency movements and their impacts on the Australia property market. Reputable authorities that are used to source statistics and forecasts include the Housing Industry Association (HIA), Australian Bureau of Statistics (ABS), RP Data and more.

For more information on the Australia property market, call us in Sydney at +61 280 147 568.