Market Update

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Australian Housing Market: Good Reasons To Be Optimistic

Australian housing marketMedia presents contrasting signals about our economy in general and our real estate in particular. While not all we hear is positive news, there are quite a few bright reports that keep coming our way. On the bright side, we have a stable government, a more than decent banking system and an economy that can make many developed nations jealous.

Overall picture for Australia is looking good

More jobs are being created, consumer sentiment is on the rise, the population is growing and so is net interstate migration to the more affluent areas. Overall, we are becoming wealthier.

Inconsistent growth patterns noted but we can be bullish

Coming to the property market, it is not hard to discern that growth across capital cities has been fairly inconsistent and that only Sydney and Melbourne have well and truly taken off during the current property cycle. If the population continues to grow, interest rates are not suddenly forced to undergo a massive correction, overseas investors keep flying in and the local economy continues to do well, there is no reason why we should stop being bullish about our property market.

Yes, property cycles cannot continue eternally and this one will be over soon enough. However, if we stick to intrinsic fundamentals, the next property cycle will be even more robust.

The world economy is picking up

The international Monetary Fund (IMF) feels that the global economic growth will continue to pick up and that America and Europe will participate in it with greater vigour. Australia’s employment rate is good enough to give a feeling of job security. In addition, jobs in the service industry are on the rise.

Consumer sentiment is rising

Consumer sentiment has not been inflexible but it has certainly been positive. When people feel secure about their jobs, consumption, spending and investments increase. Together, this creates a positive impact on the consumer sentiment.

Inflation remains in check

We have smartly checked inflation. This has been among the primary reasons why we have been able to keep cash rate down for so long. Until inflation rears its ugly head, we can keep pumping blood to the construction industry through low interest rates.

Question of housing affordability

Housing affordability has always been a cause for debate but it may be wise to look at the “real growth in prices” rather than the “nominal growth in prices”. If property prices have risen, so has household income.

Threat of household debt

I feel that there are too many good things happening and more than a few of them will impact our property market positively. If there is a threat, I suppose, it is the existing equation of household debt. Private sector debt is rising and household debt is on the rise, too. We need to constantly question our creditworthiness and keep assessing how we will fare if there is a sudden correction in the interest rate. We certainly do not want a “sub-prime” happening anywhere in Australia, do we?