What to consider for Property investment in Australia

In 2003, the International Monetary Fund or IMF said that housing bubbles in Australia and other countries will eventually blow up. In 2008, the IMF again issued a statement that Australian property market was traded with inflated rates. However, analysts could not agree whether the rise in property taxes or interest rates also played a vital role.

There is a negative effect in the economy when housing prices are inflated or marked up. A surge of the cost of residences and houses affects every aspect of life.

When housing prices are increased, people who will borrow money will also increase just to make ends meet. The question is, would they be able to pay back what they borrowed? The IMF issued warnings regarding this problem in 2010, where research show that Australian houses are the most overpriced in the world, it’s at 56.1 overpriced.

However, the IMF commentary was countered by another view stating that Australian unemployment is not as high as the UK and the US. In fact, according to this report, there was very low rate of a person not being able to pay rent on time.

There is an unpleasant effect of inflated housing prices on the bigger schema of the economy. If the residential housing cost is increased, this will lead to excessive lending to the residential housing sector.  This is where Australian finance is diverted away from its intended use.

Increase in housing taxes will lead to increase in borrowing which leads to difficulty in meeting payments.

This problem started in the late 2000, where prices of housing in Australia compared to the average income, was one of the highest in the entire world. The discrepancy led to the speculation that the country is experiencing a bubble in real estate market.  In February 2007, debt due to mortgage rose up to 80% of the country’s GDP.

 

This really posed a problem because property investment Australia is very important to their citizens. In fact, the Australian dream is to own a single detached house with a perimeter fence. Due to this, the Australian government strongly encouraged wide –scale home ownership scheme through tax incentives.  The result of which is that, 70% of Australian citizens own their home, one of the largest all over the world.

These days, home ownership is getting t be more exclusive. The all time low was that in the late 1990’s. Seeking to swiftly deal with fast rising Australian property finance, the government set up the Productivity Commission Inquiry In 2003, after the International Monetary Fund warned the government of an economic bubble.

In the next year, the commission set out a report stating that plenty of reasons affected real estate prices, causing it to skyrocket. These factors include the housing tax system, regulations in borrowing money, low interest rates and issues on planning.

In 2008, the very first Home owners grant boost was established, where a financial assistance of $14,000 is given to those who bought a house for the very first time. The aim of this program is still to support the Australian dream of owning a home without having to sell an arm and a leg.