Property Investing in Australia – Is 2010 the Year to Invest?

The property investing scene in Australia is a bit of mess – as usual the real estate agents would tell you, without a moments hesitation, that now is the time to invest! The stock market specialists, on the other hand, would say that property is still way over-valued.

Who do you believe as an investor. Well none of them – they all have an agenda and a product to sell – which is fine but as a buyer you need to be sure of your ground and some facts.

Australian Interest Rates will Go Up
I can make that statement without qualification: the cash rate of 3% is a historic low and the economy is not in recession. So long as China does not implode politically or otherwise then the Australian economy is probably not getting any worse. On last quarter’s figures and with the pick up of resource prices and the huge Gorgon gas deal in the North-West – Australia now seems unlikely to go into recession – the Lucky Country lives up to its name again.

Up or Down For Australian Property Investors?

Australian Government Subsidies Distort the Property Market.
Australian governments at both State and Federal levels love subsidies – the States particularly make a lot of their revenue from State property sales taxes, so often plenty of incentives to buy – particularly for first-home buyers. The generous Federal first-home buyer scheme has been extended to the end of 2009. Therefore first home, starter homes appear over-priced in many areas.

Top-End Australian Property in the Doldrums
If you have just come into the money and want to snap up a bargain in the multi-million dollar price range then now is a great time to invest. Particularly in Queensland and Western Australia where many on “millionaire’s row” were actually up to their ears in leveraged securities the margin calls have been brutal. From Perth to Sydney the most desirable, sea-side, old-money suburbs, are the ones with the most number of homes, the longest days to sell on the market, and the largest price drops.

Property Investment and Employment
Australian property prices are only as good as Australian jobs – if Australians feel confident that they will keep their jobs or get another contract then they love to buy real estate. Particularly in remote areas the only reason people move to the area is high-paid work. Property investment in areas such as Pilbara of Western Australia or the Northern Territory outside of Darwin, remains an investment in mining. The Pilbara is very vulnerable to the price of iron which China is prepared to pay.

This dependence on mining fundamentals extends to cities such as Perth and Darwin where there are many both directly employed in the industry: in a fly-in-fly-out capacity, and indirectly employed in support industries.

I tend to agree with the property supporter: you can’t sleep in a share portfolio! If you need a roof over your head and intend to stay in that location for five plus years then I would buy, but bargain hard. If I wanted to extend my property investment portfolio in Australia I’d be a little more cautious and be more interested in keeping track of the business news in the papers than the over-hyped property section!