The RBA brakes have been applied and the residential property market has begun pulling up. Wow that was one of the most aggressive bubbles ever seen. Obviously the recent boom has been driven by some unique forces to help it swell the way it has, including multibillion dollar stimulus packages, record low interest rates and of course coming off the back of a never ending series of Covid restriction, Australia’s suppressed population overplayed their hand and have now driven the economy into inflation.
Still, many people are surprised that the ride is over, while others ask, “Why did it go on for so long”.
Answering those questions would take a long time but one way to explain it simply is to borrow an old analogy that compares people (and especially buyers) to sheep. Now sheep are wonderful creatures and were responsible for much of this nation’s prosperity between the 1930S till the 1950s. The saying Australia rides on the sheep’s back” wasn’t a joke, for decades Australian wool and lamb bought huge amount of overseas money into the country, along with mining it was one of Australia’s most profitable exports. However, the analogy of sheep has much more to do with sheep behaviour than their monetary value.
You see sheep live in flocks and one thing you soon learn if you watch them is they are easily spooked and quickly go from grazing contently in an open field to running in a wild panic never knowing why they are running or where they are going too. Nervousness in sheep is a sure sign they feel alarmed and if one sheep starts running, they all start running.
However, here’s the difference, while sheep play it safe and run away at the hint of danger, property buyers in general react to soaring pricing prices by running into the market and paying whatever they must to secure a position within it. This is what causes the market to soar. Unfortunately, once reaching stratospheric heights banks and borrowers cannot pump enough credit into the market to stay at that level, hence it collapses and that’s what we are seeing now.
But amongst the fallout there some other records being reached that will have a much more lasting effect on things generally. Record employment, record rents and record levels of occupancy in the rental market have developed into a housing crisis. What is needed is more affordable housing and its needed now. These factors offer some great advantages for those who are not over leveraged and still want to benefit from a great R.O.I now and into the years ahead. At the top of that list of good investments ideas is the humble granny flat. While costing a fraction of the price of a new home, granny flats return well above the income made by a standard property and provide dual income that further protects the investor in an uncertain market. The benefit of easy council approval adds a special appeal to this type of investment as well. So right now, if you are deciding to invest in the property market, a granny flat is a very good choice.
If you’re interested in a design or just want to ask some questions, call us we’d love to help you.