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Understanding The Australian Property Market

Similar to countries such as the United States, Canada and the United Kingdom, the property market in Australia is struggling to know which way it will turn in 2010. Some experts predict a drop of more than 20% in property values whereas others predict a 5% increase or more.

The main determining factor that will affect property prices will be unemployment. If the unemployment rate continues to rise then it will be only people with deposits that can afford to buy real estate and new builds and many predict that the unemployment rate will soar to as high as 8%, compared to 2008 when the unemployment rate was 4.5%.

The Reserve Bank of Australia cut interest rates by a huge 3% back in 2008 which helped many people with mortgage repayments and the new strict lending rules, issued by the Australian Government, cut down the amount of mortgages given to people who would struggle to meet the repayments.

These stricter lending rules have cut down on the amount of repossessions on the market which has enabled the property market to remain fairly stable throughout the last few years.

A new grant given to first time buyers by the Australian Government has also helped, however, this is only beneficial if the people can keep up with the monthly repayments.

Debt levels are at an all time high in Australia, with more and more people borrowing from banks and credit cards to keep their heads above water. To purchase new properties or new builds will mean taking on extra debt which they obviously can’t.

Many people throughout the country are having a hard time paying their debts and many have lost their full time work and are now working part time. In 2008 the amount of people in full time employment dropped by over 44 thousand and part time jobs increased by over 40 thousand.

Other countries such as the USA, Japan and other European nations are all suffering a recession and even the big player, China has seen a significant slowdown. The world economy is another determining factor and as with other countries, Australia will not be spared.

Overall, it will be the unemployment issues that will affect the property market in Australia and although predicted to be generally weak in 2010, it should hold out pretty well for the first 6 months or so but where it heads in the next few years is uncertain.

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