There are several factors that have led to the new market conditions in Australia’s economy.
- The RBA’s decision to hold interest rates at an all-time low
The record low interest rate of 1% is an indication of both good and bad news. The good news is that there could be a few more rate cuts in the future, or even a negative interest rate, which makes the cost of money cheaper. The bad news is that the economy is not doing well and may trigger the government to stimulate the economy through monetary policy. Monetary policy is not the only tool the government uses to stimulate the economy, other large economies like the US stimulate the economy heavily through fiscal policy.
- Lending policies for most financial institutions have loosened
These loosened policies only apply to first home buyers and first time investors. The media has bombarded social media and news with the likelihood of easier lending capacities, but this does not apply to most buyers. According to our partner in the mortgage broking industry, investors with three or more properties currently experience no change in lending capacity. This is good news for homeowners who have their home as the only long-term loan commitment, as it is a great time to refinance and get the best deals from the market.
- $100 BILLION government spending in new infrastructure
The new M5, opening in 2020, is almost complete.
The M4 tunnel is open now.
Sydney’s new second airport is expected to operate 24 hours, seven days a week and will bring a significant boost in employment, transport capacity, and the night economy.
This massive infrastructure spending is one of the biggest in Australian history, and will create great opportunities for the public and private sectors of Sydney’s economy. The government is hoping that this massive spending in infrastructure will see the economy grow to the next level.
- First home buyers are the biggest group in the current market
As we are aware, the market is now changing due to new policies by the RBA and APRA. Properties below $800,000 (suitable for first home buyers) are in high demand for the current market. Newcomers are now taking advantage of government backing with stamp duty concessions and reduced deposit requirements for home loans from 1 January 2020.
- Australia is still considered one of the most outstanding countries in the world
Even though the economy in Australia isn’t showing good signs, it is considered to be a “safe haven” in terms of keeping asset value. The stable condition of politics, gun-law restrictions, and new satellite cities have made Australian residential and commercial properties some of the safest value keeping assets in the world. Overseas investors are continuing to purchase commercial or residential assets in Sydney’s most prestigious postcodes.
- Constant high level of immigration
The climate, health system, security and great lifestyle keeps the immigration flow at the highest level possible. Up to 2018, according to ABS.gov.au, there are about 190,000 people flowing in to NSW, 160,000 people to Victoria and 85,000 people to Queensland each year. The population doesn’t only grow by birth but also by the incoming flow from overseas. This high demand keeps the economy growing and this is proof that Australia is seen as one of the best countries to live. In short, we might have the hardest hit economy at the moment, but we are still in the best possible shape.
In next article, I would like to share some tips to face the challenges of the economy we may face in the future. This will include preparation for the economic recession that might happen, changes in property market, and understanding your capacity in micro economy level.
Capital Value International Group