For investors in the property market, staying informed is essential to navigating the ever-changing landscape of real estate. From fluctuations in interest rates to changes in demand for rentals and everything in between, there are countless factors that can affect your investment decisions. To help you stay ahead of the game, we’ve put together a comprehensive list of major factors influencing today’s housing market so you know what trends and developments to be on the lookout for.

Keep reading to get an inside look at how these influences shape buying and selling opportunities – with just a little bit of knowledge could make all the difference when it comes time to invest!


1. Interest Rates

The effect of interest rates on property markets is a complex one. Generally speaking, lower interest rates often mean borrowing costs and repayments are reduced, which in turn will often increase demand as the cost for investors and owner-occupiers enter the market and hold real estate is more attractive. This can create an environment in which more investors may enter the market due to a better return on their investment and lower out-of-pocket holding costs.


2. Economic growth

Property prices have historically been closely linked to economic growth. Positive economic growth typically means incomes increase, employment rates are lowered, and the demand for homes increase as migration also increases. One of the core pillars many investors take into consideration are the factors stimulating the economy. Are there multiple industries supporting the economy? Understanding the market fundamentals that are supporting an economy can help you make an informed decision and minimise the risks when choosing where to invest.


3. Location

Geography plays a large role in the housing market. Even when national housing prices have slowed, certain sought-after areas may still experience rising home values. Many elements influence a location’s desirability – from work opportunities to quality education and childcare facilities, shopping centres and recreational activities, as well as quick access to hospitals, public transport networks or highways. Each state, city and even suburb has different factors that can affect how well your investment performs. Understanding the demographics and fundamentals of the local market can help you to minimise the risk of your investment.


4. Demographic change

Demographic change can have a profound effect on the property market, with different types of housing becoming more desirable based on changing needs. For example, as people are living longer and remaining active in later life, retirement homes and assisted living accommodation have become increasingly popular. Meanwhile, as families downsize due to fewer children being born, there has been an increase in demand for smaller, more affordable properties.

You may also see the gentrification of an area, where new amenities and infrastructure change the demographics and desirability of an area.

Interstate migration can also impact the property sector, with people moving from states with higher housing prices to those with lower ones to have a better work/life balance on a comparable salary.


5. High rents

When the availability of residences is significantly less then those looking to buy or rent, we will often see an increase in demand and rental prices to match the demand. Those who are looking to buy may stay in rental properties longer as it might be harder for them to save enough money for a down payment on a property, or simply not finding a suitable property.

Often as rents increase, investors are drawn to the market as the return on investment also increases. And in turn, often stimulates new properties being built and added to the market. All of these changes have an impact on the property market and the long-term impact on your investment should be considered when making decisions about investments.


6. Buyers’ Confidence

This is dependent on how optimistic people feel about the future of the property market. Historically, sentiment has affected the market. For instance, if purchasers are waiting for both interest rates and inflation to reach a peak, property transactions may slow irrespective to the trends of other market indicators.


7. Availability of Property

The property market is underpinned by the principal of supply and demand. If there are too many properties for sale in a certain area, the prices may go down. However, if there are too few properties for sale, the competition can push prices up. Which means that population growth and new construction in an area directly affect the housing supply.


8. Property Upgrades

If there are too many houses for sale in a certain area, the prices of homes will go down. However, property values will increase if there are too few houses for sale. Population growth and new construction in an area directly affect the housing supply and property market. At the same time, if new homes are built in a certain area, it could reduce the prices of existing homes in that same location.


9. Tax Rates & Fees

All states in Australia have different tax rates on property transactions. In some states such as Queensland, there are different rates for Owner-occupiers and Investors. There are also further costs and requirements for non-resident property transactions. The difference in tax rates can make a significant difference to the purchase costs of a property and is typically a consideration for investors when undertaking their cashflow analysis to understand the full cost of a property transaction and return on their investment.


10. Government Policies & Incentives

The demand in the property market can be affected by changes in local, state and national policies. Depending on where your property is located, you may be eligible to take advantage of incentives to invest. From tax breaks to subsidies and deductions, it is worth chatting to your Mortgage Broker, Accountant or Financial Planner so you understand what type of incentives are currently available.

It should also be noted that there are some government-run schemes available nationwide specifically for first-home buyers to help get into the market sooner.


The Bottom Line: Understand the market before you buy

Navigating the property market can be a minefield with many factors influencing the overall performance of the sector. Supply and demand are two of the most important elements, which fluctuate with a variety of external influences which we have touch on in this article.

At the end of the day, changes in local or global economic conditions can impact both buyer confidence and the availability of stock, and demographic trends can impact the overall performance of the property market. All these influences combine to form a complex picture that buyers need to be aware of to minimise their risk and ensure that their investment strategy can weather changes in the market.

If you are looking to invest in property, our team can help you understand the full cost of purchasing a property. Whether you are a first home buyer, an investor or looking to refinance we will step you through the process and find you a home loan solution tailored to your needs.


Terms are subject to approved persons only. This information is true and correct as of 19/04/2023.  All of the content above is general in nature and may not suit your personal needs, situation objective & goals.