Latest figures show that Australian house prices are again on their way up, if this trend continues the average house price has only fallen by 3 per cent compared to 30 per cent in the US. How can Australian residential property prices hold up so well in this massive global downturn? It all comes back to the most significant property price driver, which is the law of supply and demand. Put simply, America has more dwellings than needed and Australia has not built enough.
Well located properties are currently being snapped up by first home buyers who have suddenly found that owning a home is now often cheaper than renting. First home buyers are the ones to watch as they affect the market more than any other group. In a typical property cycle upswing first home buyers will hit desirable suburbs by purchasing the affordable properties within these areas. Investors will then follow, then once that area becomes seemingly less affordable due to competition the first home buyers turn to the next affordable surburb, and on it goes. The cycle always starts close to capital cities and then ripples out.
So if we are now at the bottom of the next upswing, it makes sense to start buying property in well located areas before the herd arrive. Once they do, move to the next well located suburb you can find, always staying ahead of the first home buyers. I do believe that we will see double digit growth again by the end of this year. If you wait until property becomes the flavor of the month again you will most likely miss the boat as many did in 2003. Stick to the basics by purchasing the best possible located properties you can at the right price and watch your asset grow.
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