There has been no end of disappointing news for property markets across the country, but things are starting to change. We examine that data that is showing that 2013 is sure to be the start of a great recovery and prime for investors. Below we list the key reasons why.
1. Confidence is up across the board
With attractive economic indicators and a low cash rate many potential homebuyers believe that now is the time to buy. The Commonwealth Bank / Mortgage and Finance Association of Australia (MFAA) Home Finance Index has found that consumer confidence is at its highest level since May 2011, with 78 per cent of respondents believing that it’s a good time to buy property.
2. Housing finance is on the rise
Positive sentiment is one thing but actions speak louder. There has been a bounce in the number of home loan commitments that point towards a recovery. Australian Bureau of Statistics (ABS) figures show the number of home loans nationwide rose to 1.3 per cent in August. There was a surge in mortgage commitments for new dwellings up 14 per cent and the total value of housing finance rose by 0.6 per cent.
3. Properties are being sold, faster
Another sign of renewed optimism is auction clearance rates. The two biggest markets Sydney and Melbourne are sitting at 51 and 52 per cent respectively. Brisbane is sitting at 33 per cent for 2012 up from its 2011 average of 25.3 and is growing. The housing stock on the market figures are also beginning to trend downwards indicating housing stock is starting to be absorbed by the market faster rather than sitting unsold. Even building approvals are starting to improve with September delivering the second consecutive lift in figures.
4. Property prices are on the way up
Up to October there was a definitive upward swing in house prices. Capital cities saw their strongest gains in more than two and a half years lifting 1.4 per cent. The news is encouraging and combined with other factors outlined could point to a sustained change of fortunes.
5. Rents are tight and housing demand is growing
Capital city rental markets are mixed but there has been a general lift in prices and a change in vacancies. Vacancy rates in Sydney, Brisbane and Perth have tightened due to sluggish investor activity, growing tenant demand and lower construction. Certain regional areas are also experiencing tightening vacancy rates and this is likely to remain high. Overall Australia’s population is expected to grow at an average rate of 1.73 per cent per year reaching 23.9 million in June 2015.
6. Australia’s economy continues to grow
The national economy is expected to grow buy more than three per cent per annum through to 2014-2015, BIS Shrapnel says. Resource investment is expected to grow over the next two years driving solid growth over the wide economy. Household spending is expected to increase by around 3.5 per cent per annum, supported by wage and employment growth.
7. The outlook is for a continued recovery
QBE/BIS Shrapnel says Australia is well placed to deal with any uncertainty the housing sector may face. Conditions for price growth are forecast to improve across 2013 and will result in a patchy recovery across various regions. The resurgence will be driven by buyers in search of affordable homes lifting the lower and middle segments. Investors are also starting to resurface with yields on the way up and cash flow positive properties available in certain regions. The overall interest rate environment is anticipated to encourage more stable housing market conditions with housing values increasing in line with income growth.
We believe that these factors will contribute to an overall resurgence in property for 2013 and beyond.