Be reminded, median price is AUD690,000 today.

Today an ex colleague commented that if one wants to invest, it is good to take a look at Australia’s property market. The reason is because it is stable, well regulated and even easy to find professional property managers to manage for you. It is also suitable if you may be thinking of sending your children overseas for studies. After 20 years, it may be used for your children’s stay and if they chose not to go there, there’s nothing stopping you from continuing to rent it or sell it for a lump sum amount of money. I googled for some latest news about Australia and learnt something which I think I should share. Yes, if you ask me, I did harbour some thoughts about buying in Perth a few months back.
First news is that due to some potential risks from property speculation and record-high household debt in Australia, the International Monetary Fund (IMF) will be sending an economic team to Australia. The worry is more because the economic growth does not correspond to the property price increase. In reality, some of the property prices in parts of Sydney, Melbourne and Perth are already as expensive as similar properties in New York and London. Australia’s economic growth has been continuous for the past 24 years and this has of course helped property prices to increase to its current high. IMF’s economic team will investigate whether a real estate bubble is already forming. Current interest rate is at 2.25 percent and this is already at a record low but the Reserve Bank of Australia is tipped to cut rates again. Australian household debt is also at a record high. It’s at 153.8 percent. (Malaysia’s household debt to  income is at 146 percent and even this is already considered very vulnerable)  
Australia’s economy relies a lot on commodity but the prices for these are falling sharply and the current economic conditions are not really moving. Within past 3 years, Sydney’s property prices are up more than 30 percent. The median is now at AUD690,000. In terms of overall average, the median is at AUD530,000. These prices as well as a sagging economy is a concern because if interest rates are cut to push for growth, it would also be pushing the home prices even higher. Current IMF forecast is for Australia’s economy to grow 2.8 percent for 2015. (Malaysia’s projection is around 4.5 percent). Unemployment is expected to peak at 6.4 percent. (Malaysia’s unemployment is below 4%). According to IMF, all these would eventually contribute to the lower standard of living for Australians.
This investigation team would issue a four-page initial assessment in June and it will then be followed by a more detailed full report, to be released in late 2015 or early 2016.
After my thoughts about buying a property in Perth, I did some research and understood that foreigners are not allowed to buy secondary properties. We are allowed to buy only new ones. Due to the current price level, that’s the reason why most of the time when you go to any of these investment seminars, it will almost always be those one-bedroom or two-bedroom units in a high-rise development instead of the usual landed house like what the majority of Australians are staying.
Whether we invest or not invest, it is important to understand a broader picture on what is happening in the property market and then make an informed decision. If the timeline taken is longer, say 20 years like what my ex-colleague proposed, perhaps it should be okay because Australia is already an advanced economy and I do not think it will suddenly become a third world country. If you are really buying a unit for your children for their future perusal, this should still be okay because your children would need it anyway in future. If you are already thinking of migrating, I think a property is definitely needed because you cannot go there and stay in hotels. 🙂  However, if this is your first property investment overseas, please remember the IMF’s initial assessment as above. If I only have enough money for one more property, I would prefer to buy somewhere closer and where I know slightly more rather than in a foreign country. Happy reading and deciding.
written on 1 May 2015
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