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Property as safe as houses

Ronald ChanSponsored
Finbar Chief Operations Officer Ronald Chan.
Camera IconFinbar Chief Operations Officer Ronald Chan. Credit: The West Australian.

When the Federal Budget was finally released this week, there were a few hidden surprises in it which most of us weren’t at least somewhat familiar with.

A strategically released series of leaks and teasers ahead of its official release meant that the target areas and level of government spending in the post-pandemic Budget, handed down by Treasurer Josh Frydenberg on Tuesday May 11, caused very few unexpected shockwaves across the community.

In broad terms, the figures in relation to government deficit levels and unemployment were a lot healthier than most anticipated when the pandemic first hit our shores.

One of the sectors that has been impacted most after the onset of the pandemic has been the property market, in particular the Western Australian market, which suffered through a prolonged downturn in the years following the end of the last mining and construction boom.

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However, while the WA market has rebounded strongly post-COVID-19, it still has some way to go before it returns to the prices seen at the height of the mining construction boom when our median house price outstripped even that of Sydney and Melbourne.

We remain a long way from reaching those sorts of (relative) prices – even with a booming iron ore price and soaring commodity prices across the board. This is even more so for apartments, where price growth is yet to match that seen in the freestanding home sector.

Investors are typically the leading indicator of the health of the sector, with many industry commentators saying the corner has been well and truly turned after years of prolonged reluctance and inactivity, particularly in WA.

A buoyant market with more demand than supply, and the tightest rental market in recent memory, is spurring many investors who had been patiently waiting on the sidelines back into action.

REIWA revealed in The West Australian recently that investors were diving back into Perth property as real estate and rent prices rose.

Prime Minister Scott Morrison recently declared that Australian property prices were “as safe as houses” and economic fundamentals were underpinning house prices in most capital cities, with lending regulations ensuring the majority of buyers were able to service mortgages.

Mr Frydenberg also weighed in to say recent suggestions that Australia was in the midst of a housing bubble which would ultimately drag down the entire economy were fundamentally wrong.

He said making comparisons with the housing investment bubble that we saw recently in the northern hemisphere was “both misinformed and a nonsense”.

Lending for housing investment surged to a five-year high in WA in March this year, with property investment levels double those of last year and up 12 per cent month on month – on the back of our faster than expected economic recovery.

While it’s good news for the WA market, REIWA President Damian Collins said there was a long way to go before property investment reached the billion-dollar-a-month highs of 2014 and 2006-07 during the last mining construction booms.

So, if you are among those who have been sitting on the sidelines or waiting for the bubble to burst, the timing is now better than ever for investors and owner-occupiers who may have been weighing their chances.

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