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Be reminded, median price is AUD690,000 today.

Today an ex colleague commented that if one wants to invest, it is good to take a look at Australia’s property market. The reason is because it is stable, well regulated and even easy to find professional property managers to manage for you. It is also suitable if you may be thinking of sending your children overseas for studies. After 20 years, it may be used for your children’s stay and if they chose not to go there, there’s nothing stopping you from continuing to rent it or sell it for a lump sum amount of money. I googled for some latest news about Australia and learnt something which I think I should share. Yes, if you ask me, I did harbour some thoughts about buying in Perth a few months back.
First news is that due to some potential risks from property speculation and record-high household debt in Australia, the International Monetary Fund (IMF) will be sending an economic team to Australia. The worry is more because the economic growth does not correspond to the property price increase. In reality, some of the property prices in parts of Sydney, Melbourne and Perth are already as expensive as similar properties in New York and London. Australia’s economic growth has been continuous for the past 24 years and this has of course helped property prices to increase to its current high. IMF’s economic team will investigate whether a real estate bubble is already forming. Current interest rate is at 2.25 percent and this is already at a record low but the Reserve Bank of Australia is tipped to cut rates again. Australian household debt is also at a record high. It’s at 153.8 percent. (Malaysia’s household debt to  income is at 146 percent and even this is already considered very vulnerable)  
Australia’s economy relies a lot on commodity but the prices for these are falling sharply and the current economic conditions are not really moving. Within past 3 years, Sydney’s property prices are up more than 30 percent. The median is now at AUD690,000. In terms of overall average, the median is at AUD530,000. These prices as well as a sagging economy is a concern because if interest rates are cut to push for growth, it would also be pushing the home prices even higher. Current IMF forecast is for Australia’s economy to grow 2.8 percent for 2015. (Malaysia’s projection is around 4.5 percent). Unemployment is expected to peak at 6.4 percent. (Malaysia’s unemployment is below 4%). According to IMF, all these would eventually contribute to the lower standard of living for Australians.
This investigation team would issue a four-page initial assessment in June and it will then be followed by a more detailed full report, to be released in late 2015 or early 2016.
After my thoughts about buying a property in Perth, I did some research and understood that foreigners are not allowed to buy secondary properties. We are allowed to buy only new ones. Due to the current price level, that’s the reason why most of the time when you go to any of these investment seminars, it will almost always be those one-bedroom or two-bedroom units in a high-rise development instead of the usual landed house like what the majority of Australians are staying.
Whether we invest or not invest, it is important to understand a broader picture on what is happening in the property market and then make an informed decision. If the timeline taken is longer, say 20 years like what my ex-colleague proposed, perhaps it should be okay because Australia is already an advanced economy and I do not think it will suddenly become a third world country. If you are really buying a unit for your children for their future perusal, this should still be okay because your children would need it anyway in future. If you are already thinking of migrating, I think a property is definitely needed because you cannot go there and stay in hotels. 🙂  However, if this is your first property investment overseas, please remember the IMF’s initial assessment as above. If I only have enough money for one more property, I would prefer to buy somewhere closer and where I know slightly more rather than in a foreign country. Happy reading and deciding.
written on 1 May 2015
Next suggested article: Perth – City with Parks or actually Parks with a city?

Property Investment always start with knowledge. Equip ourselves with more here.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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0 Responses

  1. Guess your friend will need to do more research on australia to see if property investment there is suitable for him. Australia has been depending quite abit on china and with china slow down, australia economy will be affected in some ways. Also with the recent cut in interests rate, it is obvious that australia economy is not doing well, but this is not reflected in the ppty prices yet. Even though lower interests = lower cost in borrowing for ppty.
    it is also important to consider the currency risks. Aussie has drop quite abit recently with the int rate cut, if one is cash rich and intend to buy a property there with no borrowing, it may be a good idea.
    Otherwise, if borrowing is involved, it is important to note that when the economy is doing well, it is a double edge sword. The int rate increase and AUD appreciate will inflate the monthly installment. If rented out, not too bad then.
    🙂

    1. Yes, currency risks. This is very important because it may go double digit either way as we have seen many times. Imagine Ringgit rising back to the highest levels and AUD goes the other direction. Suddenly, the purchase of an Australian property may meant double whammy. OR, the other way round, then the investor would gain both ways but the mortgage payment would be higher too. Yes, it’s always best to buy without borrowing especially for these foreign property markets. It’s so hard to predict what will happen. Australia’s property market is already so high, yet, not many are predicting bubble yet. Perhaps the China’s support is really the backbone of the market? Yes, if I buy, I would also be looking at rental definitely.

  2. I think ppl need to understand one thing. We all know that Australian property is so HOT, then why do all these australian developers selling their units overseas? Its exactly like you mentioned in your article. The property demand is on landed properties. Once these apartments hit the second hand market, you not gonna get good value for it. We Asians dont really care much about density because thats how we live but australians do.
    You can also buy landed properties but these areas are not proven. If it becomes a bad neighbourhood, drugs and crime then you will be stuck on it value as well.
    The best way to invest in australia is to go there yourself, buy landed, understand the suburbs. And remember its not always about how close you are to the city. I know suburbs in Sydney which are 1hr from the city yet it selling like hot cakes. Its about the environment, view and density.

    1. Haha Koh. You have a very good point. ‘If it is so HOT, why are their developers selling the high-rise units overseas?’ Actually I would love to buy landed there. The environment is really nice and even the sky is much more bluer. However, the current regulation meant no foreigners can buy their secondary units. Suburbs are normal. My friends are all staying in suburbs because that’s the only place they can afford with the usual salary of a middle manager.

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