Buying Property in the Big City – How the Economy Affects Housing
For many aspiring first homeowners, buying their starter property seems like a distant dream and a constant nightmare. Young people who are looking to start families are often confronted with the reality that they can’t afford the house they want in the current property market. For this reason many people opt for the outer suburbs over the inner city, swapping convenience for affordability. But why is it often difficult to buy in the big cities and what does the economy have to do with this? Even more importantly, how does all this impact budding real estate investors?
The Economy and Housing
For many of us the economy can seem too large and abstract to warrant our attention because it seemingly has little impact on our lives. The truth is though; the economy is ever present in our everyday lives, especially in real estate.
A growing and thriving economy has a direct impact on real estate, increasing the demand for housing. This is partly because a growing economy is precipitated, in part, by an increase in population, employment, economic migrants, and other factors. Major cities are often at the centre of all these factors, resulting in a greater economic impact and a noticeable change in the real estate market.
We only need to look to our neighbours to the south for a well-advertised example of this. Sydney is considered in the top 5 most expensive places to live globally, and its median house price has recently tipped over $1 million.
Looking at all these factors and this example, it’s easy to see how the economy plays a part in property prices, and why this is often more pronounced in major cities. But what about property investment?
Higher Demand Means More Profit?
Does an investment property in an economically thriving area guarantee a greater return on investment? Well, that would be an oversimplification and ultimately a falsehood. On the contrary, every investment involves some level of risk and there are factors outside the economy and demand that impact your investment property.
If economy has driven up the demand for housing but your area is flooded with an oversupply of real estate then you won’t be able to benefit. Equally, investing in high growth areas might result in impressive short-term returns, but this could all be reversed if you’re attempting a long-term strategy.
Under the right circumstances though, having an investment property in a strong economy could result in greater returns and a more successful investment.
Making the Right Choice
If we have proved anything here it is that yes; the economy does directly affect real estate and this can have more pronounced affects in major cities. The economy is not the sole variable that impacts real estate though. A strong investment strategy is driven by more than when, where and what to buy, and a successful approach is often driven by professional advice.
If you’re looking for an investment guru to mentor you around Brisbane, look no further than Astute Investments. You can contact us at any time to organise a discussion, or give us a call on 07 5530 8407.