Five Reasons Why Now is the Right Time to Buy
In the few short weeks since the Federal Election, much seems to have changed in terms of consumer confidence and the property market…
1. The Federal tax policy for investors is clear
Regardless of your political persuasion, the surprise re-election of the Federal Coalition Government will provide greater certainty for property investors and owners. The Morrison government will not threaten negative gearing or the existing capital gains tax concessions.
At a state level, the recent Victorian budget increased the foreign duty surcharge from 7 to 8%, bringing it in line with NSW. The Andrews Government has also passed a range of measures to address the shortfall in stamp duty. These changes avoid the majority of property investors and are an indication that whilst the Victorian State Government wants to prop up falling revenues from stamp duty, it is unlikely to make substantial changes to the current tax structure or add further taxes to property.
This, combined with APRA recommendation to ease bank lending restrictions, and a drop in interest rates means by the Reserve Bank now is the time to invest in the property.
2. The cost of borrowing is falling and policy is easing.
The banking royal commission and subsequent tightening of lending criteria has no doubt influenced the slowdown of the Melbourne property market. The off-the-plan market has been further affected by the restriction of FIRB buyers locally and increased difficulty in getting money out of mainland China. While stock levels are at their highest level since 2013, new listings coming onto the market are at their lowest since 2013 (Core Logic, Melbourne Housing Market Conditions, 2019) as vendors wait for better market conditions and developers continue to sell their existing stock and hold off launching new product.
Additionally the number of new apartment launches in Melbourne for Q1 2019 is currently less than a quarter of what was approved in 2018 and an even smaller portion of what they were in 2017 and 2016 (Urbis Apartment Essentials, May 2019) which continues to hamper supply.
Source: Urbis Apartment Essentials, May 2019
Recently APRA recommending that the minimum servicing requirement for a home loan be changed from the 7% interest rate to a rate set by the banks with the buffer now 2.5% above the interest rate meaning it should now be easier for buyers to achieve loan serviceability. Last week has also seen the Reserve Banks cut the cash rate for the first time in three years to a record low of 1.25%. This predicted influx of new buyers, will see vendors and developers re-entering the market to take advantage of rising prices. These indicators suggest that savvy investors would be wise to take advantage of potential bargain stock on the market right now, before prices rise again.
3. Population growth will drive demand
Population continues to grow at near record levels. In the 12 months to June 2018 Melbourne’s population grew by almost 120,000 people (ABS – Regional Population Growth, Australia, 2017-18), and this trend has been ongoing for the last five years (Core Logic, Melbourne Housing Market Conditions, 2019).
4. Rental demand is fierce
While this has led to low vacancy rates and high yields in the rental market, particularly in in-demand areas like Docklands (Elm & Stone Rental Campaign Hits Mark),
5. The price of new apartments are on the rise
This level of growth is resulting in an unprecedented investment in public infrastructure projects like the West Gate Tunnel, Melbourne Metro Tunnel and the removal of level rail crossing across Melbourne. The consequence of this, is the cost of construction items such as cranes, steel and labour at record highs meaning smaller residential projects are more costly to build and subsequently being delayed.
These factors, combined with the paucity of new housing means that prices will soon be driven back up by demand. And it’s likely that there will be an influx of new buyers entering the market soon. To view MAB’s latest completed project Elm & Stone visit the website, elmandstone.com.au, or contact one of our sales consultants on 1300 137 590.