Most Liveable City Will Continue to Be One of the Most Expensive

Demand for overseas travel has skyrocketed. In fact, overseas travel is in such high demand we could be facing pilot shortages in the near future.

One of the most popular destinations within Asia-Pacific is our beautiful country. Australia’s reputation as a safe place with outdoor beauty, great food and wine and plenty of water sports is a powerful attraction, particularly in Asia.

But to visit is one thing. To live in here is even better. It’s why three Aussie cities are among the most liveable cities in the world.

According to Business Insider Australia, Melbourne is the most liveable city in the world for 2017.  Coming in at number five is Adelaide. Followed by Perth at number six.

Yet while living in any Australian capital cities is enjoyable, it’s certainly not cheap. As reported by Bloomberg:

Supercharged by record low interest rates, a lack of supply and a tax system that favours property investors, home prices have surged more than 140 percent in the past 15 years, propelling Sydney past London and New York to rank as the world’s second-most expensive housing market. Melbourne, ranked the world’s most liveable city the past seven years by the Economist Intelligent Unit, is now the planet’s sixth-most expensive place to buy a house.

For a while now, scores of commentators have been trying to call the peak of the Aussie property market. Yet so far they’ve all been proven wrong as cheap cash fuels property growth. Take a look at the chart below.

Australian property market

Source: CoreLogic

 

In August 2017, property values rose in all Australian capital cities except for Perth and Darwin. On a yearly basis, the average property growth in Australia’s nine capital cities was 5.81%.  And it’s all thanks to cheap cash.

Interest Rates and the Housing Market

Interest rates are a very important factor for the housing market.  If rates are low enough where property growth exceeds interest payments, then demand picks up. The opposite happens when interest rates and repayments pick up.

In Australia, interest rates are still sitting on record lows of 1.50%. And they’ll likely stay this low for some time. As RBA board member, Ian Harper explained, economic growth isn’t strong enough to justify an interest-rate increase. Policy makers will need to be content with doing little for the time being.

And thus, as cash remains cheap, property prices will remain elevated. It’s not great news for those without the means to save up for a 20% deposit. However, there is another way you can benefit from long-term low interest. To find out more, click here.

Regards,

Härje Ronngard,

Junior Analyst, Markets & Money


Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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