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The residential housing market in Australia is worth an estimated $4.86 trillion, nearly three and a half times the value of the country’s stock market and combined superannuation funds, according to rpdata’s latest report – but growth in private sector housing credit remains at record lows.
According to rpdata’s Property capital markets report, summer 2013, the impact of global financial uncertainty has played havoc with consumer confidence, which has, until quite recently ‘remained surprisingly low’. Australians appear to be more focussed on playing down debt and rebuilding bank balances, with the national savings rate at its highest level for more than 25 years.
“A record low level of growth in private sector housing credit in 2012 was reflective of both lower demand for new housing loans and an emerging mood among home owners to pay off their home loans at a more rapid pace,” says the report.
“Nonetheless, the positive sentiment contemplated as a consequence of the long and deep interest rate easing cycle, initiated by the RBA in November, 2011, is gradually flowing through, as evidenced by an improvement in housing market conditions and consumer sentiment.”
Though potential for a further decrease remains, the cash rate currently sits at the same level it was at in mid-2009, when sharp rate cuts were made to lessen he initial impact of the GFC.
However, the report says, early signs for 2013 are fairly encouraging.
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“The economic factors tracked by rpdata seem to suggest that there has been a delayed response to the on-going cuts to interest rates over the past 18 months or so. The number of house and unit transactions in 2012 was estimated by rpdata to be lower than the five year average. And although values have continued to decline on an annual basis, the rate of decline has slowed, with values increasing by 1.8% between May and December 2012. Early data for 2013 has seen dwelling values, based on the combined capital cities index, move into positive territory on a rolling annual basis.”
Furthermore, auction clearance rates rose steadily throughout 2012, while the levels of vendor discounting and average time on market have trended lower over the second half of the year. Since September, 2012, the proportion of homes selling at a loss has eased, according rpdata, while a rise in the proportion of homes selling for more than double their initial purchase price has been evident.
Rpdata says first home buyers have returned to the housing market, although current numbers are ‘well below’ the ten year average - and half their historic peak.
“This was in the 12 months to November 2009, after many incentives were introduced. The number of buyers returning to the market increased by 3.5% over the year, while refinance commitments were up by 6.4%.”
This was indicative of competition among lenders after exit fees were abolished in July 2011, says the research group, with borrowers shopping around for lower mortgage rates.
“Investment activity in the housing market may continue to improve over the coming year on the back of a number of factors namely: recent falls in home values, lower mortgage rates, rising rental rates in certain areas, the subsequent improvement in rental returns and the recent improvement in equities markets.”
