The election result was a surprise for many. Now, what does this mean for property?

Hi it’s Niro here from Investment Rise and as I record this video, it’s been about 2 weeks since the surprise election results and the question is well, what does that mean for our property markets? There’s obviously been a lot of excitement since the election results because I think was a lot of concern about the Labor Party’s policies. Look this is not a political video by any stretch of the imagination. It is purely trying to understand that well we’re going to have to live with a Liberal Party at the federal level for at least next three years and what does that mean for our property investment choices. So I think there are a lot of people who have been scared about investing and scared about even buying their own home starting to look more favourably at the market. So I think you’re going to find that the rate of prices dropping in especially our two biggest markets will slow down thankfully because the Sydney market has been falling by about 1 per cent or more even in some months for the last a year so nearly 12 percent per annum which is quite significant. So I think that’s going to slow down. But the question is will this trigger the next wave of capital growth in our markets? There’ll be a lot of local real estate agents who will tell you the answer is yes but I think you just need to be careful because the underlying fundamentals are still the same. And what I mean by that? Well we still have low wage growth. We still have a lot of affordability problems especially in our big markets. We still have an oversupply issue especially with the unit market in inner city Brisbane, Melbourne and Sydney.

So I think those issues need to be addressed. And the other thing we’ve still got is the fact that banks are still making it very difficult for investors to get loans which I think it’s the biggest issue now. Yes, you may have heard that APRA has come out and pretty much reduced the stringency and made it easier for investors to get loans least from an APRA base level. But it’s still up to bank’s discretion and I haven’t seen that flow through yet. So there are still a number of factors. So what do I think is going to happen as a result of this bit of a mish mash? Well I think in the short term, for the next few weeks you are going to see a little bit of buzz and excitement as a lot of people sort of jump in, who’ve been waiting for the election results. So I guess there’ll be a bit of a post-election honeymoon period. However I don’t think that’s going to really do a lot in the long term. Yes it will stop the market sort of you know flatlining and crashing in some places and really falling steeply in some places. I’m not expecting a crash mind you but markets were certainly falling steeply. So that will slow down. But I think you’re going to see that some pockets will still struggle especially those areas out west and that have dropped 20, 25 percent especially in greater Sydney. Those areas will still struggle. The first home market will continue to start getting up a bit more steam now. But from a capital growth perspective we still need a number of factors to come into into play. We need the banks to start lending and applying more reasonable lending criteria to investors.

Interest rates dropping which is what is expected over the next few months will be a good thing for investors but on the flip side it shows that the market, the economy rather isn’t doing so well. So that’s something to consider. So all in all what I think you’re going to see is that there are opportunities to to invest. Yes. But you need to be very careful. You need to look at the long term potential. You need to look at the… whether the market is undersupplied or oversupplied. You need to look at the vacancy factor which especially in some parts of Sydney is ridiculously high at the moment and Melbourne is as well. I mean some of the areas in our two biggest markets have had the biggest… currently have the biggest vacancy rates in over a decade. So there’s a lot of factors to consider. So yes I believe the news is good or rather it’s not bad because of who won the federal election. However don’t get caught up in a lot of the excitement that you’re going to see at the moment. I think you still need to make some strategic decisions. But yes there are some great opportunities and I think you’ll find that the markets that will grow the most are the markets where affordability is not an issue, where rental.. The rental vacancy is very tight right now and where it is undersupplied which means there are more people moving into the area than properties available to rent or even to buy. So still be strategic. Don’t try and speculate. I certainly don’t think this is going to be the start of any massive boom like we had between sort of 2012 for 2016 in Sydney and Melbourne.

So I’ll be very clear and say, I do not expect that is going to happen. However I don’t believe the markets are going to keep falling as steeply so I think you’re going to see the market now flatten out. I expect that the market will probably hit its bottom in Sydney and Melbourne probably towards the end of next year so I still think we’ve got about 18 months before the market starts to take off. But the drop for the next 18 months will be far less than what we’ve seen in the previous 18 months. So yes Sydney Melbourne I expect to still keep dropping for a while but nowhere near as asas much. So yes we’re getting closer to the bottom. I don’t though expect those markets to grow steeply. I still expect that the markets where the population are moving to, where affordability is is not an issue, they’re undersupplied. Those are the markets you need to keep looking at. In fact those are the markets that I believe will now start to grow quite steeply. So really hope that helps. Let me know your thoughts in the comments below. Bye for now.

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