Blog post courtesy of PRD Nationwide
Light At The End Of The Tunnel
Now in its twelfth year, the PRDnationwide Australian Economic and Property Report provides key insights into several economic indicators, monetary and fiscal policy, key events; and how they have impacted the property market.
Although the economy is in a relatively good state, the property market in Australia has been extremely volatile in major markets in the past 12 months. This report signals a significant change in the property market generally and particularly within the housing affordability/first home buyer landscape.
Titled ‘Light At The End Of The Tunnel’, this report highlights the encouraging environment in which we are in for the second half of 2019.
Key Findings of the PRDnationwide Australia Economic and Property Report 2019:
- Australian consumer sentiment hit 100.7 index points in June 2019, which just tipped it into positive territory. A boost in consumer confidence means an increase in consumer spending across all industries, including property. Australian business confidence underwent a radical surge in May 2019 post the Federal Election. It was quite the turnaround, as business confidence has been in steady decline since December 2017, with the lowest reading of -1.0 in March 2019.
- Capital city and metropolitan markets continued to experience a softening in median house price growth in the 12 months to the first half of 2019, at -3.2% and -6.2% respectively. Regional markets remain resilient, recording a growth of 1.7% during this time. Median house prices in regional markets remain affordable, with promising positive capital growth.
- Investors have benefited from the increase in rental activity, as many markets have shown resilience in median rental prices and vacancy rates. The national vacancy rate (as of May 2019) was 2.2%, indicating a healthy rental market overall when compared with the Real Estate Institute of Australia’s benchmark of 3.0%.
- Residential construction across Australia amounted to $16.3 billion in the March quarter of 2019, which represents a decline of -13.5% in the past six months, bringing the amount of quarterly residential construction closer to the 10-year average of $13.5 billion. A moderate slowdown in residential construction in the past six months will allow for current and scheduled property development to be absorbed by the market. This will create a more balanced level of supply and demand of property stock in the market.
- Owner-occupiers committed to $254.6 billion worth of loans in the 12 months to April 2019, whereas investors committed to $101.7 billion. The balance between owner-occupier and investment finance has stood comfortably around the 65%/35% split in the past eight to ten years. In the 12 months to April 2019, the proportion of owner-occupier finance was, on average, 71.5%. Owner-occupier spending continues to dominate housing finance commitments, outweighing investors. This is encouraging for first home buyers looking to apply for a loan.
A “quadrella” of positive policy news: no changes to negative gearing and capital gains tax, a double interest rate cut, APRA’s lending standards being reviewed and investment lending standards loosened, and the proposed first home buyers’ loan deposit scheme; have all translated into a strong consumer sentiment bounce-back. There is light at the end of the tunnel of uncertainty which will pave the way for a strong recovery of the Australian property market in the second half of 2019.
Read the full report: