While prices are a product of supply and demand, it’s worth understanding the factors that sit beneath both sides of the equation. In other words, what drives supply and what drives demand?
Incomes
Higher household incomes, thanks largely to two-income couples, have seen Australians seek better quality housing, invest more in property and bid-up pricing. It has since become something of a vicious cycle, with property prices putting extra pressure on households to earn more to keep up with mortgage demands.
Demographics
As our population continues to grow, migration continues to be strong in Australia, with many new arrivals settling in major cities.
Even without migration, however, our housing stock has struggled to keep up with demand in some cities, especially because we have long made a practice of living around our continent’s edges. Others believe we need migration to supply the trades and workers to build the houses we need.
Interest Rates
When interest rates are low, this tends to be welcomed by borrowers, as this gives households more disposable income with which to bid up prices.
So, what we gained on the ferris wheel, we may have lost on the affordability merry-go-round. When interest rates rise, you will need to ensure you have a buffer to manage any increases.
Talk to an AFG broker to check if your loan is still right for your situation. AFG brokers have access to multiple loans across a range of lenders, giving you more options to save on interest and potentially pay your mortgage off sooner.
Speculation
While Australians have long viewed bricks and mortar as a sound investment, financial speculation can fuel demand more than our desire for a roof over our head.
Investors tend to account for a sizeable portion of our home loans in Australia, which has resulted in tighter lending requirements for investors.
If you want to find out which home loan is best suited for you based on your property goals talk to an AFG broker today.
