The market is somewhat inconsistent as overseas economic factors continue toweigh heavily on people’s minds. The European issue coupled with lacking business confidence at home and political instability at the federal level is causing consumers to hold off on making major financial decisions.
By John McGrath
The market under $1M in most metro areas is strong but activity weakens the further up the price scale you go. A lot of cash is sitting on the sidelines. People deleveraged during the GFC and adopted a ‘wait and see’ approach that continues today.
Buyer enquiry is up. In March, the country’s largest mortgage broker, AFG, had its second biggest month ever in NSW since their index commenced in 2004 with$842M in new lodgements. While this clearly indicates more buyers are out there, they remain very price sensitive.
Reserve Bank interest rate cuts will no longer have the effect we’re used to given the banks’ reluctance to pass on the full amount. The official cash rate is now at its lowestsince November 2009 when the economy was recovering from the initial impact of the GFC.
While this might result in more sales activity in Winter, it won’t push prices higher because buyers are still worried about Europe and are wary of protectingthemselves financially as we enter a new era of aversion to debt. Overall, the market is not in a bad state but people continue to wait for positive signs. This has been a protracted and agonising period of uncertainty. The constant flow ofgood and bad news both at home and overseas continues to undermine confidence. Once we see some positive and sustained economic change overseas, I believe our property market will begin a long and slowish recovery over a three to five year timeframe.The flipside to a market downturn is the exceptional opportunity it presents to buyers.
Affordability has grown significantly with the recently-released HIA-CommonwealthBank Affordability Index showing an improvement across the capital cities for the fifth consecutive quarter in March.The best time to buy is when others aren’t. Markets have a herd mentality andfollowing the crowd gives people a much needed sense of security especially in this time of economic volatility.
Buyers need to be brave – this is exactly the type of market they will look back on and say ‘I wish I’d bought in 2012.’
Highlights & Statistics
Europe, lacking business confidence and political instability are worrying buyers
Under $1M market strong but weaker up the price scale
New loans up – Australia’s largest broker records 2nd best month in NSW since 2004
Official interest rate 3.50% – the lowest since November 2009
Property market recovery will take 3-5 years
Affordability improved 6.4% across capital cities in March qtr – HIA/CBA
