API Blog :: Have your say!

July 14, 2011

Do you want the good news or bad news first?


The latest RP Data Market Update provides a mixed bag of data, with both good news and bad news for Australia’s property market.

BY PETER KOULIZOS

Reading some of the newspapers or watching the evening news, you’d most certainly be excused for thinking that Australia was in an economic recession. Much of what we hear in the media is doom and gloom; rarely is there a positive story about the property market nowadays. However, when you dig a little deeper, you can also find some very positive news, which can give us a little bit more confidence in the market.

Yes, it may sound strange, but there definitely is positive news out there!

First, the bad news.?

  • Canberra was the only capital city in Australia where property prices increased during the three months to April (and that was by a miserly 0.8 per cent).
  • The number of properties selling is well below the five-year average.
    The average time taken to sell a house has increased from 41 days last year to 55 days.
  • The average time taken to sell a unit has increased from 36 days last year to 51 days – that’s an increase of over 40 per cent!
  • Vendors have to drop their asking prices for their houses more than they did last year; from a discount of five per cent to 6.5 per cent.
  • Vendors have to drop the asking prices for their units more than they did last year; from a discount of 4.5 per cent to 6.5 per cent.
  • Auction clearance rates have been trending downwards since the beginning of the year.

  • The number of properties currently on the market are at almost all-time highs – there are 280,000 properties currently for sale!
  • Consumer confidence is dropping.

Now for the good news!

  • Rents are increasing.
  • Inflation is currently under control.
  • Standard variable rates are below the 30-year average.
  • Unemployment is almost at record lows.
  • There are more full-time jobs being created compared to part-time jobs.

Even though I’ve outlined almost twice as many points for the bad news as the good news, the thing to remember is that the most vital news is good. That is: inflation is under control, interest rates are relatively low and most importantly, the job outlook is very good and getting even better.

At the moment there’s some pressure on inflation but if we continue to save our money and not spend as much, the pressure on interest rates will ease. Interest rates will probably go up sooner rather than later but when you put everything into perspective, a 25 basis point increase will put more pressure on household budgets but it won’t cause a catastrophe. Why? Because we have jobs that are secure and our wages are increasing.

Despite what you may read or hear in the media, all is not lost. Yes, property prices are dropping, but don’t expect them to drop for too much longer.

What do you think about the outlook for the property market? Is an upward swing just around the corner?

Peter Koulizos is a property educator at UniSA and TAFE and the author of The Property Professor’s Top Australian Suburbs – a guide to Australia’s top suburbs for property investors and homebuyers, available from www.businessmall.com.au

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4 Comments

  1. [...] Peter Koulizos asks this question in his recent Australian Property Investor (API) blog article, Do you want the good news or bad news first? [...]

    Pingback by Property outlook … what do you think? | piixgroup.com — July 15, 2011 @ 10:30 am

  2. Very interesting article. Suggests conditions are almost ideal right now for the property investor. Good time to be hunting for bargains; motivated sellers.

    Comment by Dave Ives — July 15, 2011 @ 10:37 am

  3. A couple of those “good news” points are actually bad news. If unemployment is at record lows and rates are already relatively low – and yet the property market is currently falling, then it can only get worse as unemployment increases.

    It is time to sit back and wait for the falls to finish their cycle. I would not even consider buying property until demand has shown signs of returning (i.e. stock has reduced significantly and auction clearance rates are back around 80%). Otherwise you risk suffering significant losses as values continue to slide.

    Yes it might be possible to buy the odd bargain at the moment, but I would only consider a property if it was 30-50% less than 2010 market value.

    Comment by Sam — July 19, 2011 @ 3:55 pm

  4. Peter, do you think the good outweighs the bad in this case? A problem with any asset or investment class these days is the amount of debt and leverage involved in all markets. Even if you’re not highly leveraged yourself, you can bet most of the other market participants will be, and that makes for an unstable investment (through no fault of your own) when the global economy has another dip and all asset classes get the jitters. To understand why excessive debt and leverage is going to have a hugely negative impact on all asset classes going forward, read up on some of the work by Professor Steve Keen. He’s the Australian guy who predicted the GFC, and he has also shown that unsustainable debt to GDP ratios in a country (which we definitely have in Australia) will always result in deflation or depression.
    Stan Newbridge

    Comment by Stan Newbridge — July 19, 2011 @ 11:05 pm

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