Is the investment climate, the property market and the economic situation right for investors to buy property in Australia and profit right now?

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Australia’s finding that she’s not immune to the global credit crisis and forecasts are that there will be around 30,000 home repossessions by the end of this year with almost half a million Australians plunged into severe mortgage stress.

A further problem that is affecting the Australian property market is the unemployment rate that’s predicted to rise from the current 5.2% to 7.5% by the end of the year. Whilst this may mean the end of the Australian property dream for many, it is also sending out strong “buy” signals for investors looking to buy real estate in Australia.

With an estimated 7,300 new dwellings to be built in Sydney this year, the lowest rate of growth in 50 years, the outlook is leading economists to predict huge rent rises of around 12% this year, following on from an 8% increase last year. Many investors are aware of this, and of the profit that they can potentially make from Australian property…so the question is, is it time to invest in property in Australia or not?

The predicted rental rate increase in Sydney will bring average rents for a 3-bed house in the city to over USD 275 per week. Sydney’s population is set to rise by 23,000 this year but rental vacancy rates are already running at 1.1%, so crunch time is coming. What’s more, according to housing estimates from the ANZ Bank, there is an annual demand for 180,000 new homes each year across the whole of Australia but in the year to September 2008 only 150,000 were built leaving a shortfall of 30,000.

Place this shortfall alongside increasing rent figures and record low interest rates and you can see why competition is hotting up for Australian property. Investors are finding that their rental properties can be profitable from day one, but they are now having to battle against first time buyers who are discovering that with low interest rates and rocketing rents, it is much cheaper to buy. First time buyers in Australia are also able to receive government funding in order to allow them to purchase their first property.

The federal government’s homebuyer’s grant offers USD 14,500 in funding, available for the purchase of new build property which is helping many first time buyers get on the Australian property ladder.

This competition is starting to have an effect on the lower end of the Australian property market, and prices are being seen to rise in certain areas by as much as 5 — 6%. Many people are still staying away from the market though, this is due to uncertainty about the economy and job market, but this is allowing investors who have the funds to hand to get in quick. It would appear that with regard to investing in property in Australia, “fortune (perhaps) favours the brave” right now?

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