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Property Starts Strong in 2014- Unemployment Threatens Long Term Growth
January 20, 2014
Australian interest rates remain at a record low with the cash rate at 2.5 per cent since August and many commentators expecting it to remain at that level when the Reserve Bank board next meets on February 4.
Although not all banks have passed on the full extent of the interest rate cuts, low housing loan rates have helped drive the strong national property market in the second half of 2013. The latest Australian Bureau of Statistics figures show increases in the total value of dwelling finance commitments, investment housing commitments and owner occupied housing commitments in November 2013, compared to the previous month.
National house prices rose 3 per cent in the September quarter, to a median $562,503, driven by increases in Melbourne, Sydney, Brisbane and Hobart. This equated to a 9.5 per cent increase over the year, predominantly driven by Melbourne and Sydney.
This price growth for houses outpaced that of flats and units, up by 2.2 per cent over the quarter to $460,315. This equated to an increase of 7.6 per cent over the year with all capital cities except Brisbane, recording an increase.
Tight rental vacancy rates were good news for property investors taking advantage of the low cash rates to expand or even begin their portfolios. The average vacancy rate for Australia was 2.5 per cent for September quarter 2013. Sydney was the tightest rental market at 1.7 per cent with Canberra the highest at 4.5 per cent.
Overall the outlook for 2014 remains positive. However, there are warning signs, with the number of first-time buyers in the market falling, economic clouds on the horizon and the Federal Government having revised downwards GDP growth figures. Macroeconomic factors may impinge on the performance of the property market next year with growth in the second half likely to be more moderate.
The Australian Bureau of Statistics reported that the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 12.3 per cent in November 2013 from 12.6 per cent the previous month.
Also, unemployment levels are a concern, particularly with the potentially damaging impact of the withdrawal of Holden from 2016 looming and uncertainty over the future of manufacturing generally.
The latest unemployment figures showed a seasonally adjusted increase in unemployment by 8,000 people and a decrease in employment by 22,600 people in December, and a seasonally adjusted increase in the unemployment rate of 0.1 per cent, taking it to 5.8 per cent.
We anticipate that the improvements in the national property market seen in 2013 will continue into this new year, but caution should be exercised with predictions of sustained strong growth, with consumer sentiment declining in the final month of 2013 and employment uncertainty set to continue.
Author: The Chief Executive Officer of realestateVIEW.com.au, Enzo Raimondo is an authoritative source of information for the Victorian property market and is now the vision of the industry owned real estate listing portal – realestateVIEW.com.au