News that Kevin Rudd has conceded defeat to Tony Abbott in Australia’s election, which sees the return of a Liberal-National coalition for the first time in six years, has prompted a number of investors to question how this could impact the property sector. While the performance of Australian property has been mixed across the country, in general prices have recovered significantly from lows in the aftermath of the 2008 US mortgage meltdown.
Sometimes it is easy to assume that a change in government will bring about a major change in economic policies when this is not always the case. There will be tweaks, there will be personalisation of Australian policies but when you look at the overall situation today, why would any incoming government wished to make wholesale changes?
Even though the Australian economy has taken a dip of late, some of which can be attributed to the political uncertainty in the run-up to the election, even the Reserve Bank of Australia sees very little likelihood of a recession in the short to medium term. While growth may not be as strong as we have seen of late, there is no doubt that the foundations of the Australian economy are still very soundly based which will help to support the property sector going forward.
Quote from AustraliaForum.com : “House prices in capital cities in Australia increased by 2.4% in the second quarter of 2013, taking the annual growth to 5.1% and values to a new all time high.”
In many ways the ongoing growth in the Australian population is off-limits when political issues such as the election are at the forefront of everybody’s mind but it is worth reminding ourselves that 2012 saw an increase of 400,000 in the Australian population. The simple fact is there is not an infinite supply of property therefore as the population grows, the economy expands and household incomes continue to move higher, there will be ongoing demand for property.
We may see some adjustments to the country’s immigration policy, we are likely to see an increase in overseas skilled labour with many recent policies reversed and this will play into the hands of property investors although location will still play a vital role. The simple fact is that the ongoing economic prosperity of Australia is attracting more and more expats to the region and international companies continue to pour money into the country.
Unemployment in Australia is currently around the 5.7% level which is relatively low compared to other developed nations around the world. We may see a slight rise in unemployment in the short to medium term, as the best of the short-term natural resources boom fades, but in the longer term there are many more natural resource projects to come online and other areas of the economy are becoming more prominent.
It is easy to forget sometimes that the Australian economy has performed admirably in what have been perhaps the most challenging worldwide economic conditions in living memory. If the economy was able to support relatively high employment in those difficult times, what can we expect when the worldwide economy finally recovers?