Indications that a property market recovery is likely in 2012 are strong, although it will be a slow and gradual process, with first home buyers beginning to stir, but not fully confident to part with their hard earned savings, and investors having already capitalised on prime market conditions.
According to First National CEO, Ray Ellis, this is the picture based on expectations of interest rates, market movements and local area member knowledge, underpinned by improving consumer sentiment as detailed in First National Real Estate’s 2012 Property Market Outlook released this week.
“Home prices bottoming out, falling interest rates and improving affordability are all working together and may prove the stimulus the market has been waiting for to get it moving again,” Mr Ellis said.
“In turn, increased interest and activity in the property market will see it strengthen further especially with investors who have already shown signs of gaining confidence at the end of 2011.”
Based on the survey findings highlighted in the Outlook, NSW should see an improving market; Victoria is showing signs of recovery, but still has a way to go, Queensland is demonstrating it has lots of potential and is finally on its way back from the devastating floods and cyclones it experienced in 2011; WA and NT will continue to be strong performers especially in resource rich areas; Tasmania is marking time but will pick up as it progresses through 2012; and South Australia will continue to be a solid performer.
All First National state chairpersons agreed buyer confidence should improve in the next 6 months, as a result of lower interest rates, improving local market conditions and a more stable global economy.
For some states, worsening global economic conditions and possible job losses have resulted in an increase in mortgage defaults and this trend may continue until more certainty and stability returns to the US, European and Chinese economies.
According to the state chairpersons, the key challenges for the Australian property market in 2012 will be focused on sustaining a strengthening consumer confidence, which are at the mercy of ongoing stability in global economies and job security; government policy and legislation (especially the introduction for the carbon tax and reduced government assistance for first home buyers); and interest rate movements.
While demand is still expected to remain relatively soft into 2012, a recent sharp rise in Westpac’s time to buy a dwelling index may be the cue for a housing upturn.
“This will, however, be dependent on ongoing interest rate cuts, job security and resulting consumer sentiment,” Mr Ellis said.
Interest rates are expected to drop further with rate cuts of up to 0.5 per cent, although some say it could be as much as 75 to 100 basis points.
“Any future interest rate cuts are expected to stimulate buyer activity as confidence improves and refinancing options broaden, ultimately strengthening the property market,” Mr Ellis said.
“With the Australian housing market now affected by daily international updates and commentary, confidence can change at a moment’s notice.”
Residential markets are expected to remain initially subdued in 2012 as consumers seek to pay off debts. However, falling house prices and interest rates should stimulate some activity, particularly among bargain hunters who have been squirreling away savings and are now cashed up.
“Our members believe the strongest growth in their regions will come primarily from upgraders, followed by investors, then retirees and lastly from first home buyers,” Mr Ellis said.
Australia’s national office market is one of the best performing commercial property subsectors –with capital value growth expectations of 2.8 per cent over the next 12 months. It currently outperforms the residential property market and this trend is expected to continue for some time to come.
“Into 2012, the commercial property market will continue to be a mixed bag, very reliant on the area and local market conditions, but the majority of members said they expected the market to stabilise,” Mr Ellis said.
According to First National Commercial members, solar power remains the most popular energy efficient feature in a commercial property, making it more rentable.
Water recycling, the ability to open windows and motion sensor lights are also sought after energy efficient features.
“Around 75 per cent of respondents said they expected sales of commercial properties to increase in 2012, as a result of their region’s attractiveness, trading up or new jobs and increased businesses in the region,” Mr Ellis said.
Growth in commercial property markets is expected to come mainly from the heavy and light industrial sector, followed by the office market and medical industry.
Regional Australia is experiencing some of the most difficult market conditions seen. Falling prices, non-committal buyers, unrealistic vendors and consistently negative market reporting throughout the majority of 2011 have affected confidence.
However, improving housing affordability and interest rate cuts should inject some much-needed confidence into the regional housing market.
“Over 2011, the regional property markets have been influenced by economic factors such as the strength of the Australian dollar value, commodity prices, demand for Australian products and nervousness around job security,” Mr Ellis said.
“The regional market has stagnated to some degree but this is expected to steady into 2012 as confidence slowly starts to build, eventually returning as the year progresses.”