Springing into action
Released 27 July 2011
Unfortunately, looming interest rates are weighing on the minds of people thinking of buying or selling in the coming months.
BIS Shrapnel forecasts a half a percent rise at the end of this year followed by another half per cent rise in the new year, due in large part to Australia’s mining boom and demand for our resources from fast-growing countries such as China.
However Westpac’s Chief Economist Bill Evans took the opposite view, expecting a sequence of rate cuts beginning with a 25 basis point cut in December, with three more to follow in 2012.
Despite the uncertainty, REINSW CEO Tim McKibbin expects savvy buyers to take advantage of the softer conditions and clearance rates to rise above 60 per cent during spring selling season.
He says there is still a strong market appetite within certain areas. He also points out that the clearance rate on flats and apartments suggests “buyers are trading down in terms of size to get on the property ladder.”
A recent survey conducted by realestateVIEW.com.au reinforces that it is a buyers’ market. The survey found that buyers’ standards have risen and they are less likely to make sacrifices than buyers in 2010. Where 66 per cent of consumers felt they had to increase their budget to find a suitable property in 2010, only 55.3 per cent felt the same way this year.
Another subduing influence will be the flood levy, introduced by the Gillard Government in January to help cover the cost of rehabilitating flood-affected areas in Queensland and Victoria
Paul Bloxham, Chief Economist of HSBC, predicted the levy would have a similar effect to an interest rate hike, potentially dampening consumer sentiment.
People earning between $50,000 and $100,000 will pay 0.5 per cent of taxable income in excess of $50,000. People earning over $100,000 will 0.5% of taxable income in excess of $50,000 and one per cent of taxable income in excess of $100,000.
On the plus side, country areas have been boosted by a $7,000 Regional Relocation Grant. This should certainly be a positive factor in the minds of city folk who may already have been thinking about a tree change.
In addition, the property market in Newcastle is expected to take a quantum leap with the mining industry boom.
Property analyst BIS Shrapnel is forecasting a six per cent rise in median house prices in the Hunter Valley by 2014, as mining and major road projects come to fruition. The Hunter Expressway, in conjunction with the booming coal sector, is expected to stimulate the local economy and encourage first homeowners to migrate from Sydney.
Competition at the lower end of the market may be less due to a dwindling of first homebuyers, many of whom have already bought in the past few years due to the grants available. This could act as a disincentive for vendors thinking of listing houses and apartments that would normally be snapped up by this group of buyers.
However, there is a light on the horizon. Amendments to the First Home Saver Accounts Act were made in late May, entitling those saving for their first home to a government contribution of 17 per cent on the first $5,500 deposited. They will also qualify for a concessional tax treatment.
Savvy investors will take heart from figures that show a continued housing shortage, particularly in Sydney, which underpins property price growth in the coming decade.
A report from the National Housing Supply Council estimated a shortfall of 178,400 across Australia in 2010, and this has been projected to grow to 308,000 within five years.
Sydney is uniquely affected by the housing shortage, with the cost of property development estimated to be $200,000 more expensive in Sydney than in any other state.