Housing market 'not entering boom times': Residex

by 08 Nov 2013

All is going well for Australia relative to most developed countries of the world, according to Residex founder, John Edwards, who says the RBA and Federal Government should be comfortable with the transition process taking place as the country moves away from the mining boom to a more ‘normal’ economy.

“There has been a surge in business confidence since the announcement of the Federal Election, which seems to have carried forward into the first few weeks of the new government’s term.”

As far as the housing market is concerned, Sydney is currently the standout performer with its house and land market performing strongly, however, the city’s unit market is only performing slightly above inflation (1%), says Edwards.

“The reason for this is a surplus supply of unit stock. The majority of new stock in Sydney can be found in the unit market, while the house and land market cannot keep up with demand.”

The position across the country is similar. Unit developments are the preferred option for developers and as a consequence, supply is sufficient to ensure growth in the unit market is kept to a relatively low level compared to the house and land market.

“Sales activity also confirms that the market is not overheating and we are not entering boom times….The data indicates that while things are improving, there is some way to go before we reach a historically ‘normal’ market. Total sales activity is still lower than it was in 1999.

Growth in the markets has basically been driven by a shortage of stock for sale, particularly in Sydney. However, as the ‘Spring Selling Season’ gets underway, there has been a significant increase in property listings which is helping growth rates to moderate.”

Residex models suggest that growth in 2014 will be similar to what has been seen this year and that growth will moderate once interest rates start to move up to more normal levels.

“I believe that while the economy is doing relatively well and sentiment is improving, it still needs a further boost as interest rate reductions have not stimulated business activity sufficiently. I think there will be a further interest rate reduction, which will probably be the last in the cycle, in the order of 0.25%. It is unlikely that the RBA will move on the rate position until February as it will want to assess the impact of the new government, see what flows from the Christmas trading period and if the improved sentiment in the business sector flows into improved investment activity and employment. Inflation does not look as if it is an issue for the RBA as a wage blow-out is unlikely given the potential for a deteriorating employment situation.”

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