April 11, 2017
There is speculation that Australian property values will drop later in 2017, especially if interest rates rise. But, many industry experts and economists are now saying that changes in rates won’t do anything to slow the market. Why? Well, economic shifts and demand will stabilise property for some time to come.
Historically speaking, the housing market experienced high demand in 2016, with an influx in new housing stock. Then, further rate cuts in May and August added momentum to the market. When banks introduced independent rate rises and owner-occupier and investor rates later in the year, buyer enthusiasm should have fallen. However, these didn’t have much of an impact. Instead, consumer sentiment stayed high.
From an economic sense, higher interest rates won’t take the heat out of the market. Firstly, the Australian economy is making up ground. Labour market prospects are improving ABS data signifies that the national unemployment rate has fallen. Plus, over the last 12-months, more than 4,300 jobs emerged. Some three-quarters of these were full-time positions. According to data, this is more than double the national growth rate.
Although domestically speaking, consumption is slower than expected, but still consistent with weak growth in household income. Overall, Australian GDP growth has slowed to the economy’s potential, which is relative to the labour market and employment growth. In addition, the move from the mining boom has been slow, but the nation is now picking up speed. Low-interest rates and the drop in the value of the Australian dollar over the last 12-months also supported growth.
Generally, these conditions have strengthened the national market, although there is a significant variation in Sydney and Melbourne markets. Nevertheless, home prices in these capitals continue to rise, while Perth has fallen. Despite this, signs of improvement in Perth are noticeable with population growth remaining steady.
The Australian population now sits and 24.13 million, according to ABS data, and is slightly lower than forecast. Nevertheless, earlier quarters have recorded strong levels of growth. National population growth rose by 1.42 percent or 337,821 persons over the year ending June 2016.
On a state-by-state basis, Victoria leads the growth stakes, with a 2.07 percent increase recorded between June 2015 to 2016. New South Wales follows this state, registering a 1.39 percent increase. The Australian Capital Territory is next with a 1.28 percent growth. Following is Queensland with a 1.35 percent increase for the year, and then Western Australia with 1.05 percent. All other Australian states and territories recorded levels of growth under 1 percent.
As a result, by 2056, Victoria will have a larger population than New South Wales. This year’s data is the state’s highest level of population growth since 1964. Primary drivers of population growth in Victoria were interstate and overseas migration. Subsequently, the government’s hiring freeze added to interstate migration. Also, low interest and rising rental prices are encouraging migrators to buy a home, rather than lease a property.
Consequently, dwelling numbers nationally are increasing. Thus, new build numbers have increased for the fifth year, with 240,000 new homes constructed.
Over the last year, national real estate sales grew by 3.4 percent to $36.22 million. This figure is higher than the Pre-election Budget Update Forecast, and above the 10-year forecast. Therefore, economists and property market experts are suggesting that the Australian real estate market has 5-speeds.
Hence, Sydney and Melbourne are in 5th gear, recording more than 10 percent growth and the highest demand for property. Canberra and Hobart sit in 4th gear with consistent growth. Next, Adelaide and Brisbane sit in 3rd, with growth of 4.2 percent and 3.6 percent respectively. Perth and Darwin take out 2nd with patchy activity. Lastly, in 1st gear, with 2.8 percent growth, is regional Australia.
Written by Refinancing.com.au
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