Market Update

Stock remains low - gain access to the huge number of off-market properties where opportunities do exist

Latest statistics show the property market remains solid

property market graphProperty market cynics never tire of talking about a real estate bust. Times have really taken an interesting turn though and a few revealing property statistics have thrown eggs on faces of doomsayers. Michael Yardney in a terrific column for the Property observer highlights how the climate has changed a lot in the last one year.

Doomcallers had such a lot to cheer about in 2012:

  • The property market was in a fidgety state.
  • The share market was in pits
  • Optimism regarding the Australian mining scene was at a serious low
  • Commodity prices in China were steeply falling
  • USA was finding it difficult to cope with the aftereffects of the Sub-Prime crisis
  • The Eurozone was very shaky
  • Rumors were afloat about the fall of the world banking structure.

Two kinds of investors suffered last year

Yardney creates a nice backdrop of ‘perceived pessimism’ but quickly clears the air saying that the market on the whole did quite well. Only two kinds of investors did badly- those who waited-and-waited to invest looking for a fall in prices (they lost out on some serious capital growth) and those who jumped on property projects without prior analysis.

The second bunch of investors sometimes bought pre-construction properties and had their chin on their palms when the final project value fell below the buying cost. There were others who were hard hit in the ‘house and land’ package (oversupply had them big). While hoping for the best, Yardney also feels that those who have invested in properties in mining towns may just have shaky days ahead.

Today, the Australian property market is a lot more stable

While the pessimists kept moving from one side to the other on the proverbial seesaw last year, they do not have much going for them now. Very strong positive trends have all but perished their hopes. For one, the global economy is a lot more composed. Australia is itself very well placed economically. Most of its intrinsic financial values are intact. Employment is low and payrolls are rising. Interest rates are low, inflation is well in check and liquidity-backed purchasing power is increasing.

Things could hardly get better.

  • Consumer confidence index is peaking and is a lot higher than the long-term average.
  • Glenn Stevens has already confirmed that the Australian Realty has taken a positive turn.
  • Prevalent interest rates have given a lot to cheer to the investors
  • Unemployment is quite close to being in check.

In the final analysis

The graph on housing finance approval for owner-occupied lending is a heartening one. Some government impetus is required to ensure that the first home buyers make a greater percentage of owner-occupied homes. I think that investment lending for Foreclosure homes and other distressed sales should also be monitored more regularly. Australia’s real estate is based on intrinsic values and its measuring tools are all nicely in hand- CRR, interest rate, inflation, employment rate, CPI, price-asset inflation, among others. From here, the growth is likely to be more robust.

What would you propose to increase the first home buyer count? I invite your opinions.