The property market looks set to remain flat for the remainder of 2012 - and although the turbulent conditions are giving lemons, savvy brokers are still making lemonade. We speak to PETER BROMLEY of LJ Hooker and PAUL BLOXHAM of HSBC for their market outlook.
Video transcript below:
Donna Sawyer, Australian Broker TV
Donna Sawyer: House prices are falling, auctions remain steady and overall the property market looks set to stay flat. It seems the outlook changes depending who you ask, but Peter Bromley of LJ Hooker is a glass half full kind of guy.
Peter Bromley, LJ Hooker
Peter Bromley: Auctions particularly are steady and clearance rates are about the same, so it hasn’t actually lifted much at this stage, although there are some states that are showing more improvement than others, so I think there are some encouraging signs there. On the broker side and on a finance side, he is seeing that our brokers are actually a lot busier this month with enquiries, so I think over a longer period of time, we might see some uplift.
Paul Bloxham, HSBC
Paul Bloxham: We are in a different economy to where we were 5 years ago. House prices are not rising quickly. House or wealth is not building quickly, the global environment is very different and that is meaning that households are needing to change the way they think about the world and because they haven’t, because the structure of the economy has changed, households are just not very happy about things. They are used to seeing their house prices rising, they are used to seeing their equity prices rising and that’s just not happening in the current environment.
Donna Sawyer: Paul Bloxham of HSBC, a former RBA economist isn’t quite as optimistic. He says the days of double digit growth on property investment are over and he is reluctant to make a call on what the RBA will do next.
Paul Bloxham: The rate outlook is a very tricky one at the moment. I think based purely on domestic conditions in Australia, it’s hard to build a case for the RBA to cut any further. The labour market is looking a little bit better, the unemployment rate is stable, retail sales rose in the first quarter of this year and I think there is a bit of rebalancing going on in the Australian economy. A bit more support for those non-mining sectors of the economy and of course you’ve got the mining investment boom going on as well, but of course the big, the elephant in the room at the moment is what’s going on in the rest of the world and in particular what’s going in Europe and that could see decisive cuts by the RBA.
Peter Bromley: We would expect to see some further rate cuts, certainly in terms of where we are. I think our overall cash rate is still where it is at the high 3, 3.75 is still very high for a developed country like Australia. So I would not expect anything less than probably 50 points before the end of the year. I see some other commentators are already saying 75.
Donna Sawyer: So what’s a broker to make of the current market conditions? Peter Bromley of LJ Hooker says smart brokers are staying in close contact with their existing clients.
Peter Bromley: The experienced brokers are doing two things. One is they are actually talking to their clients about if they got the best deal and I think in terms of re-financing there is a great opportunity. Competition is strong, but with now exit fees online, a consumer can really shop around, so talking to the broker and for the broker to actually capitalise on that is important. I think the other thing from a broker’s point of view is they should be making sure they are speaking to those customers, they have put into a home loan over the last 2 or 3 years, because people are very conscious of what rates are doing, people are conscious about what their property is worth, so I think it’s important to actually communicate with their customers.
Donna Sawyer: This is Donna Sawyer reporting for Australian Broker TV.