What Does Employment Have to do with Property?

If you’re taking out a Border Bank home loan to invest in a New South Wales property, you’ll want to think about its future market value.

The Housing Outlook for 2015 to 2018 report by QBE shows that median house price growth in Sydney is predicted to drop to 7.3 per cent in 2016. In the two years following that, prices are forecast to backslide slightly.

There are a few factors behind this. In December 2014, the Australian Prudential Regulation Authority (APRA) began pressuring major banks to keep investor lending down. This came in the form of a 10 per cent target threshold for investment credit growth.

Figures from the Australian Bureau of Statistics (ABS) show that this has affected investment home loans, which saw a 0.4 per cent seasonally-adjusted drop from July to August 2015. Major banks have also recently started to bump up interest rates in light of the APRA’s measures.

When you also take into consideration the influx of new housing being built across New South Wales, predictions around declining house values certainly seem reasonable.

But are cooling prices and rising interest rates an indicator that there won’t be demand for your investment property in the future?

Perhaps not.

More employment means more demand

A report by CoreLogic RP Data mentions that instead of just keeping your eyes on interest rates, there are other variables to take into consideration that affect demand – namely, employment.

Sydney and Melbourne have both seen the most dramatic property momentum with values and demand going through the roof. It’s hard to call it a coincidence that, simultaneously, both these cities are responsible for 74.2 per cent of Australia’s full-time employment growth.

CoreLogic Senior Analyst Cameron Kusher mentions that while “job creation isn’t necessarily the be all and end all of housing demand it is an important component to consider”.

It makes sense, considering the ability to afford home loans is tied to people’s financial and employment situation.

Of course, the immense value increases in Sydney property witnessed throughout the year was never thought to be practically sustainable. It’s highly likely that the market will cool regardless. However, that doesn’t mean the future potential of your real estate isn’t bright.

As long as employment opportunities continue to grow in this region, demand for your NSW investment property should have no reason to be lacking. Get connected with Border Bank’s professional lending experts to see how you can take your first step in fulfilling your home ownership dreams.