As property investors, there are plenty of things we can do to safeguard our property assets.
We can purchase them in the most effective buying entities; structure them financially to deliver the best, most tax-efficient profits; and of course, make sure we buy quality assets in the first place.
But there are a number of external factors that can influence the growth and value of your property investments and unfortunately, there’s not a thing you can do about it.
Your Investment Property magazine recently published a list of some these factors, which are impacting Australian property markets at the moment.
According to the YIP report, construction work is sitting higher than decade averages in six of the states and territories. The Northern Territory was up almost 171%, followed by Western Australia (33.4%), Queensland (10.7%) and New South Wales (10%). While construction levels are largely robust, the gap between the strongest states and the weakest remains large. Tasmania is now sitting at 4.7% below the decade averages and the ACT are just scraping by at 0.2%.
2. Economic growth
This may be surprising to some, but New South Wales doesn’t top the list here. The Northern Territory is continuing to lead Australia’s economic activity, sitting at just under 45% above its ‘normal’ decade average. This region also has the fastest annual growth rate in the nation, up 3.2%. The next strongest state for economic growth is Western Australia, sitting at 26% above the decade average, followed by the ACT (up 15.2%). Both Tasmania and South Australia are seeing modest rates of less than 1% above decade averages.
YIP’s article shows that the latest unemployment rates are above their decade averages across all states and territories. Northern Territory has retained its position as the nation’s strongest job market with an unemployment rate of 4.3%, followed by ACT at 4.4% and Western Australia on 5.7%. Tasmania’s unemployment woes appear to be improving with the jobless rate falling to a 39 month low of 6.5%. While the unemployment rate in Western Australia may remain low, it has increased by 35% over the first quarter – the highest in Australia.
I’ve always been a big believer that population growth is a strong sign for property investors to look out for. According to this report, annual growth has eased in all states, apart from the Northern Territory. Western Australia is looking the strongest with an annual growth rate of 2.12%, however this is trending at 20.3% below decade-average levels. Victoria came in second with a growth of 1.77%, followed by New South Wales at 1.43%. Tasmania has seen the strongest growth rate in 2.5 years at 0.64%.
5. Housing finance
Victoria has now taken the top spot in Australia for housing finance with commitments 11.5% above the long-term average. Next strongest were New South Wales on 10.4% and Western Australia at 5.5%. Northern Territory remains the weakest market for housing finance with commitments 23% below its decade average. The next weakest was South Australia down 13.7% and Tasmania at 10.8% below its decade average.
Now, as an investor, what are you meant to do with all of this information? In simple terms, it forms part of your knowledge bank and allows you to make informed decisions about your next investment.
For instance, if an area is experiencing a high unemployment rate that can represent a number of economic pressures that could indicate a particular area should be avoided at present.
It also helps you to understand why you may be having trouble in certain areas, such as when getting finance; many banks are over-exposed when it comes to investor lending at present and they’re clamping down on investment loans as a result. If you’re aiming to buy an investment in Victoria, and the data shows that housing loans state-wide are 11.5% up on average, then it may explain why you keep hitting the brick wall when shopping for a home loan.
As always, forewarned is for armed. Remember there is no such thing as a silly question so if you’re experiencing any challenges in your investment journey, feel free to reach out to us at Real Wealth Australia or Real Wealth Money for clarification and guidance.
Til next time, happy investing!