When we talk about the prices and markets, it’s safe to say there are a LOT of things we could dive into.
The price of toilet paper at the supermarket…
All the way to the price of a home in South East Queensland’s property market.
The interesting thing is, regardless of whether you were struggling to find toilet paper back in March 2020, or you’re struggling to get into the market as a homeowner or investor in 2024, you are likely being impacted by the same set of economic principles.
SUPPLY & DEMAND
2 peas in a pod, supply and demand interact with one another to determine how prices move.
And the thing is, we can’t really talk about one without mentioning the other.
The idea of Supply, is how much we as a market are receiving of something. For example, how many new homes are being built in Australia this year, or how many boxes of TP your local Woolies is receiving every week.
We can describe supply in three ways:
Undersupplied, adequately supplied, or over supplied. This is where that beautiful relationship between supply and demand comes in!
These levels of supply are determined by Demand. If there is plenty of demand, then supply is more than likely to be inadequate, and so on and so forth…
The interesting thing here is that S&D are completely dependent variables, meaning that a change in one will almost certainly change the other.
Take something completely random, like ski boots. Their demand in sunny Queensland would naturally be quite low – it’s just not cold enough. In order to ensure adequate supply, manufacturers and distributors will not be stocking them in their stores. BUT, what happens if the weather suddenly drops to -5˚C and people are skiing at Mount Tamborine? The demand will go up, which will make it necessary for supply to go up – simple! The thing is, when supply and demand dont change at the same rate, that’s when we see changes in prices.
In the property market, these levels of supply and demand are more or less determined by the powers that be – the Reserve Bank and the Government work to ensure that prices remain manageable and the market remains strong by changing fiscal policy and determining interest rates.
The thing is, it results in fluctuations as time goes by – for example throughout 2020 and 2021, when we saw interest rates drop, and people become SUPER confident in buying property, which resulted in incredible price hikes in small markets around Australia.
And then again throughout 2022 and 2023, with interest rates heading back up, it meant that people were less confident in borrowing money, which resulted in a slight drop in the market.
As a property investor, what does this really mean?
In the current situation we find ourselves in, supply for property in the Australian market is LOW and demand is HIGH.
There is an unprecedented undersupply of property in the market. Last year, the number of approvals for new builds was at a 10 year low of 164,000.
Not to mention, according to Oxford Economics, Australia would need 110 THOUSAND more homes to satisfy its undersupply – and that doesn’t even take into consideration growth that we’re likely to see in our population over the coming years.
With a low number of new builds, the situation is only magnified by growing demand as a result of population growth and increased spending confidence.
According to the Australian Bureau of Statistics, Australia’s population grew by 624,000 people in the 2022-2023 Financial Year – a number over 150,00 higher than the previous growth record.
Alongside this, the population growth projection for this FY is predicted to be over 500,000 again.
And when demand is high, but supply is low – the laws of supply and demand tell us that prices are bound to increase.
So, as a prospective investor, what should all of this tell you?
Well, we’re in a time of price GROWTH in the property market – particularly for quality properties that build long term equity.
Being savvy and making the most of your opportunity is what counts at the moment.
We’re so passionate about helping women thrive through property investment…
Want to chat about how you can take that first step to make the most of your opportunity before the end of 2024?
Get in touch, or give us a call on 0455 223 865.
