Factors Affecting Housing Demand in Canberra

Housing demand in Australia often changes. It has its fair share of highs and lows depending on a number of factors. There may be high demand for homes despite limited available supply or vice versa. Let us take a look at these factors and how they affect demand for housing. It pays to understand why demand is volatile. Use this knowledge to strategise on your property purchasing plans and avoid real estate decisions you might later regret.

Better Income Sources

At the height of Australia's "resources boom," the country experienced great productivity. Commodity exports fetched higher prices while average incomes and overall wealth among households also had significant increases. This was a time when families, couples and many income-generating professionals wanted to invest a portion of their increased income in real estate investments and improvements. More and more households were also keen on buying "holiday" homes or second homes in more relaxed locations and coastal areas. However, due to limited supply, the high housing demand resulted in higher prices instead.

Competitive property auction biddings, while helpful in effectively allocating scarce housing resources, has also led home buyers to increase their work load to cover mortgage debt. Some market segments have lower buying capacity than others and may tend to accumulate debt along the way. This remains a major challenge to home ownership, regardless of market conditions.

Rental Prices

Increasing rental prices in the last few years has driven property seekers to decide against renting and just outright buy a home instead. Higher rents prevent them from saving for a deposit. It is not clear how rental prices exactly affect housing demand but, after weighing the pros and cons, most prospective buyers find it more beneficial to purchase property than signing a lease contract for a rental property, whose price could increase at the discretion of the landlord or based on volatile market conditions.

Declining Household Size

As divorced and separation incidents increase and more and more people prefer to marry late or have fewer children, household sizes have considerably declined over the years. Housing demand in a given population is greatly affected by individual priorities and sentiments. Statistics show a growing number of lone person households and this rate is expected to increase than families and groups. Nevertheless, Canberra's demographics, and Australia's population in general, has always had steady and strong growth. High immigration has also reinforced population growth and housing demands. But because most migrants move to locations with insufficient housing supply, prices in these areas (e.g. Sydney) are relatively higher than in areas with low immigrant presence.

Lower Interest Rates

Low interest rates are an encouraging factor for most Canberra investment property buyers and regular home buyers. Households now have better borrowing power compared to the mid-90s as well as the ability to bid up or negotiate home prices. They can choose their mortgage payment plan. In the past, interest rates can go as high as 14 per cent. Present rates are more manageable, however, treading around 6 to 9 per cent after inflation rates have been controlled.

Experienced property buyers are aware of these factors and have worked their real estate plans and decisions around them. Wise buyers are not only up-to-date with recent property news and existing marketing conditions, they also understand what drives or influences housing demand. Such knowledge ensures they avoid the pitfalls that most informed home buyers succumb to. If you have important property purchasing or real estate related questions that need professional answers, you are welcome to get in touch with our experienced team of Canberra buyer's advocates. Call us or send us an enquiry online anytime at your convenience.