Home' Connexus : Issue 44 Contents 14 Connexus
The lowest official interest rates in
60 years have buyers responding with
renewed interest in the property market.
The housing market is well on the
way to recovery this year, says Andrew
Wilson, senior economist at Australian
Property Monitors. While markets across
Australia are moving at a varying pace,
generally the trend is up.
The price of established homes in
the eight capital cities rose 5.1 per cent
overall in the 12 months to the end of
June, according to Australian Bureau of
At the lower end, first home buyers
remain cautious about diving in but there
has been strong activity from investors.
“ We are getting this flight to bricks
and mor tar Australia-wide,” says Wilson,
who also warns of a downside. “ We need
to be ver y circumspect about investors,
par ticularly the mums and dads, looking
for short-term returns in the property
market. It can be fraught with danger,
par ticularly given that the economic
outlook is a little cloudy.”
Lower interest rates and rising rents
are making buying cheaper than renting
in more areas of Australia. An analysis
by RP Data found that there were 692
tow ns and suburbs where it was cheaper
to buy than rent in June this year. This
was up from 179 locations at the same
time in 2012.
Of concern is a lack of new building
activity. “One of the issues the Reser ve
Bank has faced is that we haven’t
generated any new homes,” says Wilson.
“ This is supposed to be the balancing
factor. Yes, low interest rates drive
up house prices, but that’s offset by
increased supply through new home
building, which is supposed to balance
out by providing mor e buyer demand. But
it hasn’t happened this time.”
Apar tment constr uction rates are up,
but they take two to three years to come
The Housing Industr y Association
estimates that housing starts increased
8.3 per cent last financial year, to
157,108, after two years of decline.
However, it forecasts a fall of 4.2 per
cent for 2013-14 as growth in New South
Wales and Wester n Australia slows.
People are also not renovating as
much, choosing to save their income
instead. Total investment in r enovations
fell 6.6 per cent in 2012-13 to a decade
low, says the HIA. It expects renovation
spending to increase 3.5 per cent this
financial year, taking investment to $28.9
billion. That would still be $1.8 billion
short of the record set in 2010-11.
On the positive front, research by
mor tgage insurance lender Genwor th
shows that homebuyer confidence
rebounded significantly towards the
middle of the year. The Genworth
Homebuyer Confidence Index reached its
highest level since it was fir st calculated
six year s ago. The index, which measures
homeowner sentiment from a sample
group of 2,124 mor tgage holder s, jumped
from a record low of 93.4 in March to
100.1 at the end of July.
For those looking to enter the property
market, housing affordability and saving
for a deposit remain the biggest barriers
to home ownership.
In July and August, Sydney auction
clearance rates hit a record high for
winter, recording six weeks of more than
80 per cent, according to APM figures.
SQM Research managing director
Louis Christopher is predicting price
growth of 9 to 12 per cent over the year.
The Sydney auction market has
been as strong as it was during the
property boom of 2002-03, says Wilson.
However, prices are growing much
more moderately. Wilson predicts price
increases of 5-7 per cent over the 2013
calendar year, on the back of 3.4 per
cent growth in 2012. If prices do rise
7 per cent, it would be “a little bit of a
cold shower” to talk of a property bubble
emerging, says Wilson.
While the budget and middle markets
up to about $2 million are strong,
Australia’s most expensive capital city is
still not performing on all cylinders.
“ The top end of the Sydney market is
quiet,” he says. “First home buyers are
at record low levels, but investors are
at record high levels, so investor s are
taking up that first home buyers’ slack to
a cer tain degree.”
The positive auction clearance rates
The residential property market is picking up across
Australia but new home building is still lagging.
BY CAROLYN BOYD
27/09/13 4:56 PM
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