Australian Consumer Confidence
Bad news and fear sell clicks. We’ve been saying it for years, and it is as true now as it was in the past. Newspapers and media outlets rarely have positive headlines, let alone positive news. From a business point of view it makes sense, given their revenue model is directly linked to engaging headlines.
There is no doubt at the moment that there is a general sense of fear regarding the economy. Inflation, the cost of living, and interest rates certainly exacerbate this fear.
We notice the cost-of-living increase when we fill up our cars, (even EV drivers, with the cost of electricity on the rise), buy groceries, or pay our mortgages.
On the surface, it makes sense to make decisions based on the current economic climate – but if the media majority is focused on the negative, are we really getting a realistic overall picture?
Let’s rewind 6 months when the economic outlook was very different; Confidence was high, the media at the time was generally more positive, reporting on low job vacancies, property prices growing and the end of the pandemic.
Consumer confidence is as low now as it was during the GFC, 2007-08. What is interesting, is the rebound in confidence and property price index on the other side, which saw home values rising higher than before the GFC.
Looking at consumer confidence and home values, dips tend to be short-term. The fears that have lowered confidence will soon fade, and life will go on.
An important question to ask is, do we make long-term decisions based on short-term trends?
Have no doubt about it, property investment is a long-term play. For the most part, you will not get rich overnight from property. However, when done properly, it is a very safe option, that will produce amazing long-term results.
Property prices always come down to the simple equation, supply vs demand. So, lets talk about both.
Supply
There is a limit on the number of properties available in the market, and the only way new properties are added is through future construction. Looking at the chart below, it’s clear that net additions to the housing market are not going to reach pre-pandemic levels until after 2025.
This is a serious constraint on the supply of new properties available and it is a major factor in driving the competition for rental properties, and owner-occupied properties in the affordable end of the market.
Demand
When vacancies are limited, the competition per property is increased, and prices rise to match.
Australia is currently in a position where future supply is bottlenecked, at least until after 2025, and rental vacancies are at all-time lows.
The property demand is only increasing, and with renewed emphasis on international skilled immigration, Australia is forecast to have population growth of around 1 million people over the next three years.. This is a huge increase in demand, in a market riddled with supply constraints.
(source: population.gov.au)
But where is the growth occurring? During 2021-22, Victoria had negative population growth as an impact of the pandemic. Queensland and Western Australia were attractive destinations, and this trend is forecast to continue.
With a strong forecast population growth for Victoria, Queensland and Western Australia, not only will this lead to an environment of rising rents and increased competition for affordable properties, but it will also impact our current job vacancy of over 460,000.
Population growth, combined with wage growth allows for higher property prices, and increased rental returns.
(source: abs.gov.au)
Property confidence.
Looking at the fundamentals that drive property prices – supply and demand, the outlook looks very strong. A combination of already tight supply, future proofed until 2025 at least, high population growth and wage growth makes property investment an attractive option.
The temporary factors that have led to a downturn in confidence will eventually end, just like the GFC. On the other side is a return to positive consumer sentiment. As the fundamentals for property are already so strong, the forecast is bright.
OpenCorp’s clients have succeeded and beaten the market, regardless of consumer confidence or market cycles by following a long-term strategy. As everyone’s goals and timeframes are unique, OpenCorp employ a large research and analytics team in-house, that pick the right properties for our clients specific needs, in the right area, in the right market- every time.
There is a saying along the lines of ‘you have to be in it, to win it’. No one has become wealthy from sitting out of the market, and this is especially true with property, given its effectiveness as a long-term strategy. Let’s not forget, Australians have recently become the wealthiest people on earth, largely on the back of strong property growth. (https://www.afr.com/policy/economy/australians-are-the-world-s-richest-people-20220920-p5bjg4)
Chat to OpenCorp’s team of experienced investment consultants today to find out how we can help you start, or continue, to build your wealth through residential property investment. Click Here
