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Andrew Bell’s Market Wrap: 5 Factors Driving the Real Estate Market

By Andrew Bell

Issue 4 | February 13th | 5 Factors Driving the Real Estate Market 

Hi, Andrew Bell here and coming to you today from this magnificent home at 116 Edinburgh Road, Benowa Waters. It is an immensely popular Hampton’s style home on 1,085m2, with 22 metres of main river water frontage. This style of home fits beautifully on the Gold Coast yet it is rare to find, and certainly rare to find one of this quality. It truly has been built to the highest possible standard and offers a refreshingly new standard of housing here on the Gold Coast. It is a generous 5-bedroom home with an option of a home office or 6th bedroom and has extensive family and entertaining spaces. The easterly aspect offers Surfers Paradise skyline views which reminds you just how close you are to the beachfront. Contact Carita Lanham on 0413 130 330 or for more information or to arrange an inspection of this meticulous attention to detail family home.

Over the years I have shared that there are five primary drivers of the real estate market and these drivers give us some forward notice of how the market is likely to unfold. At any one time one of these factors is the most dominant, and some of them are very prominent whilst others are almost impossible to detect.

The first driver is GDP. We see around the world that economies are truly struggling at present for what was typically strong growth numbers of ten or more years ago. In the low inflationary climate and with trade wars and massive disruption to previously normal businesses, we see GDP is extremely sluggish. Australia is fortunate that it is one of the best GDP’s in the world, but it is just not strong enough to be creating strong wealth in Australia. The second driver is interest rates. A blunt tool that is either intended to accelerate borrowings and therefore economic activity or to rein that spending in. At the moment, we continue with record low interest rates, but we are seeing that it is just not doing the stimulation to the economy as it used to for decades prior. The third driver is unemployment. No real estate market is strong when unemployment is rising or at high levels. It has been hovering around the early 5 percent mark for some time. It was declining and then reversed and started to rise, but it is showing a further downward trend recently. At 3 percent it is considered no unemployment and at 5 percent it is somewhat at a neutral position. The fourth driver is population growth, and this is one of those less obvious drivers. I will talk more about that in just a moment. The last driver is inflation which is currently well below the Reserve Bank’s target range of between 2 – 3 percent; hovering around 1.7 – 1.8 percent.

All these factors marry together to generate what we call ‘consumer confidence’. It is clear that confidence abounds for the real estate market at present and that is because population growth or population shifts are having a profound effect, but also record low interest rates makes real estate an extremely attractive option.

I do expect by midyear that the knock on effects to our economy from the drop in tourism as a result of our disastrous fires and now the Coronavirus will put a dent in consumer confidence, but that lack of confidence should settle by years end.

All and all the five drivers of real estate suggests that the market will remain in positive territory and as this initial burst of activity passes through, we will settle into a more modest growth market, yet there are going to be real winners and losers. One of the strongest influences of price movement over the next couple of years will be population growth or the movement of populations within Australia. I will talk more about that in my next fortnightly eNewsletter as it is a critical factor driving the real estate market at present.

Whilst we continue to wrap up and record a host of additional sales post our residential The Event programme, we are in the full swing of our Commercial ‘The Event’ programme. Have a good look at the properties in this week’s eNewsletter as commercial real estate is the hottest item in Australia in real estate at present. You get a far better return owning a commercial property than you do with money in the bank.

That is all for this fortnight. I look forward to being with you again in two weeks’ time. Until then, let’s continue to show great love to all our family and immediate friends, and continue to support all our fellow Australians who have had their worlds turned upside down from the ongoing droughts, fires, and even some flooding in North Queensland. What comes around goes around so lets really support one another.

Kind regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group


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