Experts believe today’s property market, for agents and purchasers alike, is all about stability.
Reserve Bank of Australia governor Glenn Stevens has predicted near-term stability in the housing market as one of three key areas with the ability to continue to drive economic expansion and cement domestic growth, but not at the level of a decade ago.
Speaking at the Committee for Economic Development of Australia (CEDA) last week, Mr Stevens said the low rate of mortgages in arrears currently serviced by Aussies now runs at less than half of a per cent, which is low by global standards.
Mr Stevens said Aussie households are currently servicing higher debt quite well, the odds are against households being a strong driver of strong growth the way they were a decade ago.
“Households being willing to increase their debt and lower the share of current income being saved was a striking feature of Australia’s economic landscape from the early 1990s until just prior to the financial crisis,” Mr Stevens said.
“Consumption spending consistently rose faster than income and the ratio of debt to income went from about 60 per cent in 1993 to 150 per cent by 2006.
“But as I have argued before, it seems unlikely that household debt can rise like that again. Nor would it be desirable. So while we can expect that household consumption spending can grow in line with income, or maybe a little fast given the rise in net worth over the past two years, the odds are against households being a driver of strong growth the way they were a decade ago.”
Mr Stevens said fluctuations in Chinese house prices are what speculators should keep their eyes on, adding that housing prices in China are falling at present, which is not unprecedented.
“Yes, house prices can fall, even in China and this area – the asset price and credit nexus – is the one to watch, more than the monthly export figures or PMIs [Purchasing Managers’ Index] and so on. This is the third time in the past decade this has occurred.”
The Real Estate Institute of Australia (REIA) believes the recent decision by the Reserve Bank to leave rates unchanged will extend the favourable market conditions from 2013, with the flow-on effect being real estate agencies being more confident about their future, with many forecasting continued growth in revenues and profits for the year ahead.
In an exclusive interview with Real Estate Business, REIA chief executive officer Amanda Lynch said some market analysts are even predicting rates will not be increased until the first quarter of 2016, providing a very stable outlook for both real estate businesses and property buyers.
“We experienced the cyclical nature of the market just a few years ago when median house prices were stable through 2010/2011 with a small drop in June 2011,” Ms Lynch said.
“What we saw in 2013 was the market’s rebound and we were not surprised with the strong performance in some parts of the country, particularly where demand was high and supply was limited.”