Property Outlook for 2013
By Peter Sarmas on 15 Apr 2013
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Source: Hakan Dahlstrom via Flickr
The property market showed signs of stabilising in 2012 as the Reserve Bank of Australia reduced interest rates to an all-time low of 3%.
Recent avoidance of America’s “fiscal cliff” and the latest Chinese export data changed sentiment among some economists. Three of the four major banks have revised expectations of 3 rate cuts by the RBA this year. Instead, they see the Australian and global economies improving and showing growth. Only one rate cut of 0.25% is now expected in March until further data is digested. The Australian economy has been resilient thus far, surprising experts and going against the trend of many global markets. Unemployment levels are holding steady.
Cautious consumers are still saving their money and prefer cash over credit. Data shows a reduction in the amount of money the typical household is spending, which has led to lower credit card use and a fall in the number of home loans being sought and approved. Finally, both the CBA and Westpac have stated that more than 59% of their customers are ahead of their mortgage repayments and mortgages are being discharged at record numbers.
As the mining boom is expected to come to an end in 2013, the Reserve Bank has stated it will turn its attention to stimulating growth in other sectors of the Australian economy. One of these sectors is the property market, which is good news. But lower interest rates alone won’t increase property buyer activity.
The key indicators to look for in a recovery of the property market will be (i) consumer confidence, which is tied to global and local economic stability, (ii) unemployment levels and (iii) affordability. The other wild card to consider is the impact the federal election will have on confidence levels. At this point in time, it’s difficult to predict. We will have to watch this play out.
