Theoretically, what drives the long term performance of fixed supply residential property?

Discussion in 'Investment Strategy' started by PeteProp, 19th Apr, 2022.

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  1. PeteProp

    PeteProp Member

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    Ignoring interest rates (since they're cyclical), what drives property growth when supply is fixed?
     
  2. Gen-Y

    Gen-Y Well-Known Member

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    Demand - example - population growth, foreign investors, institution investors.
     
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  3. Trainee

    Trainee Well-Known Member

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    If you assume supply is fixed or falling (e.g. a 1000sqm block in a particular suburb that has no more undeveloped land) then gentrification and redevelopment is a big driver of values.
     
  4. Gen-Y

    Gen-Y Well-Known Member

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    The only supply of multi storey buildings can grow or shrink at a much faster rate - depending on the demand / prices.
    single / double storey dwelling house isn't very elastic - main reason - land releases.
     
  5. Angelina

    Angelina Well-Known Member

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    Australia becoming relatively a better place to live as compare to the rest of the world.
     
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  6. Ross Forrester

    Ross Forrester Well-Known Member

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    The economy. A strong economy generates real wages growth and encourages more people to move to the area.
     
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  7. southern-investor

    southern-investor Well-Known Member

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    The thing ppl need to remember is inflation of increasing living expenses also means increasing house prices as well.

    Inflation is affecting everything from labor costs to fundamental building blocks of building a house. Timber, ceramics, doors, windows....everything is up. This also means house prices are going to continue to go up. Its hard to control inflation with monetary policy when the fundamental issue is delays, logistics issues, silicon shortages, petrol prices and raw material. Raising interest rates does will not guarantee lower cost of living or inflation.

    This is why the RBA is very hesitant to raise them. Even if they do inflation still may be very high due to matters outside of their control.
     
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  8. Trainee

    Trainee Well-Known Member

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    Maybe think about what's not cyclical. Population growth and nominal wage rises, imho. If those happen, it's likely nominal property prices will go up. Do real property prices matter? Not much if you are using debt.
     
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  9. MelindaJennison

    MelindaJennison Brisbane Buyer's Agent & QPIA Business Member

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    In a fixed supply environment what drives property prices?

    DEMAND

    What contributes to demand?

    Population Growth
    Desirability (eg: specific school catchments zones)
    Access to finance (low interest rates as an example; credit policy)
    Lifestyle changes (eg: impacts of Covid)
    Economic environment
    Jobs (and therefore wages)
    Most of the other points already raised above :)

    I could go on and on .....
     
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