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Things in the Australian housing market are looking good - unless you’re a broker, says Residex founder, John Edwards.
“The housing market is presenting growth on an Australia-wide basis and the trend is moving in an upward direction.”
However, while capital values are recovering, Edwards says sales volumes remain low – and this is particularly bad news for the mortgage industry.
“In fact, sales in January – February 2013 were the lowest seen on an Australia-wide basis since 1999. In many respects, the Reserve Bank and other managing agencies of the Australian economy should be more focused on this number than auction clearance rates and the upward trend in capital values. It is volumes that drive wealth generation and the economy.”
Without volume, he says, mortgage brokers, real estate agents, lenders, and even goods and services industries supporting home improvements suffer.
#pb# Edwards also says movement in consumer sentiment needs to be ‘significant’ for considerable growth to occur in the housing market and that the impact of falling or increasing sentiment only manifests in housing growth numbers ‘sometime’ after a period where the change has occurred.
“Overall, while sentiment has been a major issue with respect to housing market performance recently, I am inclined to believe that this indicator is not significant enough to be a meaningful capital growth predictor of housing over the longer term.”
Furthermore, he says, affordability needs to improve further before any significant increase in capital values becomes evident.
“Interest rate reductions will help and I remain of the view that there will be further cuts later in the year. However, improved consumer sentiment and steady employment statistics released by the ABS this month suggest that the Reserve Bank won’t move to adjust rates in the near future.”
“Overall,” he says, “there is every indication that the market is improving but it has some way to go. If you are currently intending to invest or buy a new home, now is the time to start looking as downside risks are reduced.”
