Apartment owners and investors could well be forgiven for looking to sell their property
amid recent poor media coverage around body corporates, changes to taxes and
tenancy laws, and the struggling market as a whole.
The key metrics that drive apartment prices however, suggest it could well be worth
sitting tight and waiting it out, or buying now before any price jumps kick in.
There are five main economic indicators to look at when trying to predict which direction
Melbourne apartment prices are headed, and most of them are suggesting prices are
soon to head up.
1. Employment
2. Interest Rates
While mortgage holders have suffered through 13 interest rate rises in a row, the official cash rate is still moderate if you look at it from a long term perspective. On top of this, most economists now agree the next move on interest rates will likely be a cut, not another rise.
It comes off the back of the US Federal Reserve this week cutting its rate for the first time in four years, signalling the end to their fight against inflation.
That puts more pressure on countries like Australia to do the same, providing an incentive to apartment buyers to take a loan, knowing their mortgage will probably get cheaper over time.
3. Supply
The housing availability crisis is proving a tough nut to crack, with the high costs of labour, materials, tax, risks and holding costs all making it very difficult for the building industry to get cracking and quickly increase the supply of apartments.
The outlook for apartment supply in the next two years at least is still in heavy shortage to meet demand, and that means upward pressure on apartment prices for the next 3-5 years.
4. Demand
Demand for apartments is still through the roof, as it is for most dwelling types during this difficult housing crisis in Melbourne and Australia.
Demand for apartments is largely driven by migration, and that policy is unlikely to change while the Government seeks new workers to sustain the economy.
Apartments are a perfect way in many respects to house new migrants and they have the added bonus of housing people using the same nearby transport and amenity infrastructure that is already in place.
5. Cost of Living
For apartment buyers and investors to have enough savings for a deposit for a loan to buy, they need a strong household budget balance.
Accompanying the housing crisis, Melburnians are also facing a cost-of-living crisis, driven largely by high rents and high interest rates.
There is no doubt ties are tough for many, but governments around the country are making cost-of-living measures their number one priority and as we mentioned, there could be interest rate relief on the way soon, suggesting things could slowly start to turn.
