With COVID-19 disrupting major industries in 2020, including the real estate industry, how are things looking for the Australian market in 2021?
What determines a property’s price point?
Determining any property, whether it’s a house or just a piece of land for sale, involves several different factors. A lot of these factors are beyond anyone’s control, with some of them having nothing to do entirely with the property itself.
Here are some of the main things that determine a property’s price performance and growth:
1. Economy
Regardless of whatever state a country’s economy is in, its performance has a great effect on people’s power to buy and sell any property.
2. Consumer confidence
Consumer confidence is directly tied to how well the economy is doing. In most cases, indicators of a healthy economy are enough to give consumers greater confidence in making big purchases and investments. Buying a property is perhaps the biggest purchase and investment an ordinary folk will make in his or her lifetime. In a thriving, or even recovering economy, where the number of unemployment plummets and foreign investors seek opportunities to buy businesses, consumer confidence is high.
3. Government policies
Governments have different financial policies that affect their local real estate industry. These include, but are not limited to, taxes, legislation, depreciation, and homeownership grants. These things factor in to determine an increase or decrease in demand for property in the local market.
4. Employment
Employment levels can greatly affect the real estate industry in obvious ways. If the unemployment rate is high, most people cannot afford to make any payments on mortgages which affects the demand for properties. On the other hand, in a healthy economy where people are more open to making big investments, the demand for real estate property goes up.
5. Local demographics
Communities are broken down into demographics that also affect how properties are priced in an area. Demographics according to age, income bracket, crime rates, household structure, and other significant data can dictate the real estate market.
6. Growth of population
Population growth, specifically household formation, can increase a greater demand for properties as families need a house to move into whether to buy or rent. The increase in household population is directly proportional to the increase in demand for habitable properties in communities and localities.
7. Credit availability
The real estate industry, at the end of the day, is just a money game with properties involved. The availability of money and interest rates help drive the market prices up or down.
8. Supply
Just like any other market, the law of supply and demand is one of the main considerations on the price tag of a real estate property. For instance, a seller’s market means that the number of shoppers far exceeds the number of homes listed. Now depending on which end of the deal you’re in, you may or may not be at an advantage since the lack of supply can make property prices skyrocket.
The factors above collectively dictate the market value of any property. Of course, it is not just limited to the ones listed above. There are still other determining factors for real estate market values. We just wanted to show you how dynamic the real estate market is and how it can be greatly affected by something as consequential as the pandemic.
There is no “best” or “worst” time to buy properties
Given the premise of how prices are determined and the still ongoing global pandemic, a lot of people have been asking is 2021 a good or bad time to invest in properties?
While we would want to give a definitive answer to this question, the truth of the matter is there is no best or worst time for property investment, at least not generally. It will still boil down to different factors surrounding you personally. Even if the economy is recovering now, if at this time you don’t have a stable source of income, then we would advise against it.
On the other hand, we’ve also seen several people sell their properties and buy new ones at the height of the pandemic because they had the means to finance their purchase, from the downpayment to incidental expenses to closing costs.
There really is no absolute way to identify when it is a good time to buy or sell. Any time can be the worst time or the best time to invest in real estate. It will all depend on your goals, budget, timeline, risk tolerance, and surrounding circumstances if 2021 is a good time to get a piece of the action.
It’s good that a lot of investors and buyers are keeping an eye out for forecasts and predictions. That’s part of doing your due diligence. It gives you a clearer picture of what to expect. But understand that we’re living in extraordinary and unprecedented times where we’re all basically writing the playbook. We’re all playing it by ear now.
Experts and analysts can weigh in on the discussion and it’s wise for us to carefully listen and thoughtfully consider the things they say but at the end of the day, you need to discern how to go about it depending on your own situation.
