supply and demand

Supply and demand dynamics play a fundamental role in determining property prices. When there is high demand for properties but limited supply, prices tend to rise which is what we’re seeing now. Massive demand, but limited supply doe to low private and public investment in housing. Conversely, when supply exceeds demand, prices tend to fall. We saw this in Perth around 2017 when prices stagnated or went backwards due to oversupply and harsh APRA regulations aimed at curbing Sydney’s growth. Several factors influence supply and demand in the property market:

1. Population Growth: Population growth drives demand for housing as more people require accommodation. Cities experiencing rapid population growth often see increased demand for housing, putting upward pressure on prices.

2. Economic Factors: Economic indicators such as employment rates, wages, and economic growth affect people's ability to buy and invest in property. Strong economic conditions typically lead to higher demand for housing and can support higher property prices.

3. Interest Rates: Changes in interest rates influence borrowing costs for property purchases. Lower interest rates make mortgages more affordable, stimulating demand for property and potentially driving up prices. Conversely, higher interest rates can dampen demand and lead to lower levels of growth. Interest rates are not always correlated with growth or lack of, other market forces will play much bigger roles.

4. Government Policies: Government policies, such as incentives for first-home buyers, stamp duty concessions, and zoning regulations, can affect supply and demand dynamics in the property market. For example, policies that encourage property development may increase supply and moderate price growth.

5. Investor Activity: Investor demand can significantly impact property prices, particularly in markets where investors play a significant role. Investor activity is influenced by factors such as rental yields, capital growth prospects, and taxation policies.

6. Housing Market Sentiment: Market sentiment, including consumer confidence and investor sentiment, can influence buying and selling decisions in the property market. Positive sentiment can drive demand and support price growth, while negative sentiment can lead to reduced demand and lower prices.

Overall, the interplay between supply and demand determines property prices in the real estate market. Understanding these dynamics and monitoring key factors influencing supply and demand can help investors, buyers, and sellers make informed decisions in the property market.