"Residential property in Australia has a long and successful history of investment performance over time. It is one of the lowest risk forms of growth investment available and consistently out-performs, with less volatility, other forms of investment".
Residential property is the only major growth market which is not dominated by investors - people driven by profit motive. This limits the impact of the business and economic cycles on residential values.
In that respect residential property is unique.
When the majority of stakeholders in any market act in unison they create volatility. Prices moving up or down rapidly. With investors representing only 1 in 3 of all residential owners, the residential market is more tolerant of adverse economic impacts.
Like most things, the market is cyclical and the forces of supply and demand are, and always will be, the engine that drives residential prices.
In general terms if demand exceeds supply, prices will rise. If supply exceeds demand, prices will fall, or remain the same. If demand equals supply, nothing much will change.
Supply of property in a residential market means the total stock of dwellings. Not to be confused with the volume of property on the market for sale.
Forecasting changes to the number of dwellings involves quantifying the likely rate of new completions, demolition of existing dwellings, allowing for second or holiday homes and rental vacancy factors.
Demand is the number of household groups in a given location who require housing. Sounds simple, but is surprisingly complex.
Consider these points, all of which impact demand. The current number of households, the shrinking size of those households and the rapid rise of single person households. People living longer, high divorce rates, immigration, interstate migration, children living with parents longer, marrying later, having children later, the birth rate, changes in employment locations and the effect of the information revolution, artificial intelligence and now a pandemic.
All these come together to tell us the rate of new household formation for a given area, and therefore the number of dwellings that are required to house that population. It brings a high degree of predictability into the equation.
It doesn't follow that a population surge from any source will necessarily lead to growth. It is the overall equation of supply and demand which determines the result.
All the factors which make-up supply and demand can be quantified and brought together to create an informative picture which indicates the likely oversupply or deficiency of housing stock in the market.
This is the growth engine driving the residential market.
There is a school of thought which thinks time in the market is far more important than timing the market. While there is no question that taking a long term approach makes complete sense, timing your point of entry into the market does matter.
The Property Clock