April 2013

As always, buyer sentiment continues to be largely determined by the combination of local area market conditions and the overall macroeconomic environment. Speculation that the rate cutting cycle has now ended continued in the media last week, along with increasing predictions of future price growth in the property market.

A news.com.au article said the latest Reserve Bank (RBA) review shows banks have been increasing the size of the interest rate buffer used in deciding whether borrowers will be able to service their loans.  Only a year ago, banks were adding 1.25 to 1.75% to the standard variable rate, now they are applying 1.75 to 2% to ensure borrowers do not borrow beyond their means in a temporarily low interest rate environment. Interestingly, News Limited reported bank funding costs are improving, but says any move for banks to decreased interest rates independently of the RBA is unlikely until next year.

Property Observer reported a new quarterly index released by NAB suggests Australian house prices will rise by 3.6% over the next two years, due to rebounding sentiment and led by WA and Victoria. The state outlooks differ significantly in the review, with a 3.8% rise forecast in WA over the next 12 months, followed by Victoria at 2.4% and NSW at 2.2%. Expectations are weakest in Queensland with 1.3% growth predicted. Reuters reported that more Australians now expect home prices to rise in the year ahead since 2010, according to the latest Westpac and the Melbourne Institute Confidence Survey.

The latest data from SQM Research shows the number of properties listed for sale rose by 3.8% during March, but is still 2.1% lower than March 2012. Sydney recorded the largest rise last month with 7.6% more listings. Managing Director Louis Christopher said the current upturn in the property market is a much slower and more cyclical lift than that of 2009. According to Christopher, without the stimulus of the First Home Owners Grant the current recovery is based instead on interest rate cuts spread over a long period of time and moderate economic growth.

In economic news, ABS data released last week revealed a surprise increase in the unemployment rate, with both full-time and part-time unemployment falling backwards in March. Unemployment rose by 0.2% to hit 5.6%.

With future conditions as difficult as always to predict, we encourage you to carefully review all activity around your property this week in light of the current environment.