A Year In Review
Although the impact is uncertain under COVID-19, the upswing in the housing market over the last few months has been the strongest in over 30 years, encompassing both houses and units in 97% of regions nationwide. Despite rising house prices, residential properties are selling rapidly according to the statics from REA.
Not only the high demand from home buyers, but also the government stimulus such as HomeBuilder program boost interest in land estates. Developers are likely to continue to take advantage of buyer demand and fast-track new projects wherever they can access land or infill sites at financially viable prices.
Solid confidence is not just seen in the housing market, but also in the financial sector. Record-high ASX, huge inflow into property investment funds and mortgage funds indicate investors are looking for return, especially wholesale investors.
With deep understandings and rare insights into Australia’s property market leveraging on extensive in-house property development and property management capabilities, we successfully launched SIX funds with total project size more than $120m.
Looking forward, we believe property investment can deliver excess return compared with other sectors. The drivers for strong property sectors include:
Strong Economy Recovery
Although Australia recorded “technical recession” last year due to pandemic, Australia’s economy has witnessed rapid recovery. Australia’s economy is now larger than that of pre-COVID. The most recent ABS national accounts release shows that through the year GDP rose by 1.1% and GDP per capita rose by 0.8%, indicating Australians are better off today than they were before the pandemic. The recovery of economy is mainly driven by property sectors considering its significant proportion in Australia’s GDP.
Low-Rate Environment
In July publication, RBA decided to retain the targets of 0.1% for the cash rate. And it is firmly believed that cash rate will be retained until 2024. Besides, RBA will continue to purchase government bonds after the completion of the current bond purchase program in early September. This purchase will be at the rate of $4 billion a week until at lease mid-November to further support the economic growth. Market liquidity is creased, which enable investors to access cheap money and ready availability of credit.
Short Supply in the coming future
Inspired by the increased home buying demand, dwelling approval increased this year. But compared with the peak in 2017, the downward trend is apparent, indicating potential short supply in the next 2 to 3 years. In the scenario of migrants coming back and short supply, the housing market will be further pushed.
Tax Effective Policy
Australia’s tax policies favour property investment over investment in other assets. Negative gearing means an investor can write off investment losses against their income, making it tax effective. In July, Federal Labor has abandoned negative gearing reforms, which eliminates the uncertainty of the policy consistency.
Overall, we have a solid view that housing market will sill grow. Therefore, we will work closely with all our partners to proactively seek property investment opportunities and manage risk on behalf of our investors. We have prospective projects with greatest potential in our pipeline, those projects are developed by creditworthy developers with low risk and high return. If you want to know more about the investment, please contact us.
We thank you for your continuing trust and we remain committed to helping you achieve your financial goals.