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Three key market factors are likely to cushion any impacts of growing global uncertainties due to the ongoing conflict in Ukraine, experts from BuyersBuyers say.
BuyersBuyers co-founder Pete Wargent said stable credit growth, tight housing supply, and the Reserve Bank of Australia’s reticence to hike the cash rate are expected to keep the property market a “safe haven” for many investors.
“Average loan sizes for new borrowers are also running at record highs, with very few signs of concern from borrowers about the outlook for interest rates,” he said.
Latest figures from the Australian Bureau of Statistics (ABS) showed that loans to investors rose by 6.1% in January to reach a record high of $11 billion.
While Mr Wargent said there is some degree of caution especially given the likelihood of a rate hike by the RBA, investors are still in good position as they can still get loans with advertised rates of below 3%.
BuyersBuyers CEO Doron Peleg said the Reserve Bank of Australia’s patience on timing the interest rate hike will also play a factor.
“The RBA has consistently stressed that the goal is to see the return of full employment,” he said.
“As for the impact of geopolitical uncertainties, our research shows that Australian property has rarely been significantly impacted, even throughout some of the most dramatic events in recent modern history such as 9/11, the Gulf War conflicts, or the Asian Crisis.
“Even if interest rate hikes are forthcoming down the track, they will likely only be delivered in a very considered and gradual manner.”
Meanwhile, Mr Wargent said the shortage of housing supply would likely be a consistent feature of the housing market over the next few years, keeping price growth elevated.
“With achievable yields of 4% on some residential property, or higher in some markets, and rents likely to surge in 2022 due to tightening rental vacancies as the borders reopen, this still makes for an attractive equation for property investors with a 10-year outlook,” he said.
According to Domain, the national vacancy rate has dropped to 1.1% in February, the lowest since records began in 2017.
Meanwhile, the sales market also felt some pressure during the month as listings dropped by 16.8% from a year ago.
“Rising materials and trades costs will limit the supply response,” Mr Wargent said.
“With many projects built on fixed price contracts, the pressures on the construction and development sector – where profit margins are typically quite thin – have been rising. Building approvals are already trending lower now as the HomeBuilder stimulus wears off.”
The border reopening also provides a solid opportunity for Australia’s property markets.
“Internationally there are concerns and tensions, and there will be a flight to quality in 2022. Property is often seen as a safe haven choice in Australia, and this time will be no different,” Mr Wargent said.
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Photo by @david_watkis on Unsplash
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