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The ScoMo bounce and two interest rate cuts are all breathing new life into Australian property, according to realestate.com.au.
Chief economist Nerida Conisbee said in the realestate.com.au Property Outlook to July 2019 that all indicators suggest that demand is on the rise.
“Search activity has seen a bump, particularly in Melbourne and Sydney, our hardest-hit markets, and clearance rates in premium suburbs are getting back to high levels,” she said.
“We are yet to see any real uplift in the number of people listing properties for sale, and pricing data is yet to reflect a change in conditions, but it is likely that the bottom is very close.”
But Ms Conisbee warned of some “very dark clouds” looming on the horizon.
“Although buyers love an interest rate cut — we see an increase in search activity on realestate.com.au almost as soon as it is announced — the Australian economy isn’t looking particularly healthy.
“While many economic indicators have been poor for some time now, the bright spark has always been low unemployment. With this creeping up and the Reserve Bank pushing through two interest rate cuts very quickly, the positive effect of cheaper finance may not be enough to offset the fact that people are beginning to lose their jobs.”
Ms Conisbee referenced the most recent property downturn, saying it was self-imposed by restricting finance, but also that it was characterised by “very little” distress.
She said this is important to understand as it meant that, ultimately, there was more control over the outcome.
“If a lot more people lose their jobs, then things could get very bad and it will be far harder to turn things around,” Ms Consibee said.
“If the interest rate cuts are enough to stimulate the economy and property prices continue to see a rebound, we are now looking at a very different property market to what it was like during the boom.
“Investor lending, which is now down by 45 per cent from peak, will unlikely get back to where it was any time soon. Buyers from Asia, a key market for new development, have dropped dramatically. Over the past 12 months alone, property seekers from China have dropped by over 60 per cent to the lowest level we have ever recorded, and confidence in the new apartment sector is low following some high-profile structural issues.”
However, Ms Conisbee also said some things are looking “particularly” positive.
“Many mining towns are returning to growth after five years of negative conditions. Rental growth in these areas started some time ago, but a recovery is now following suit.”
She said Queensland is leading the way in this recovery.
“Brisbane has been the first capital city off the block in terms of price growth, and Mackay is right now the top regional growth area in Australia.”
Ms Conisbee said rental demand is highest in Hobart, Gold Coast and Melbourne, likely driven by jobs growth.
“And while the extreme price growth in Hobart now seems to be over, Launceston is taking over. Regional Victoria is also doing well, with many suburbs in Ballarat, Bendigo and Geelong experiencing never-before-seen property demand.”
She said political instability globally is also driving search activity out of the UK, Hong Kong and the US.
“It is unlikely that these markets will provide the same level of demand for new apartments as we saw from China, but there is the potential for this interest to convert to transactions,” Ms Conisbee said.
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