As promised, I’m following on from my last blog, called ‘2011 – annus horribilis’. (The term ‘annus horribilis’ is the Latin phrase for ‘horrible year’.)
BY PETER KOULIZOS
I don’t think too many property owners will be sad to see the end of 2011, which saw property prices drop in every capital city. Now for 2012 – annus betterus (it’s not a Latin phrase).
I’ve named 2012 annus betterus as I believe it’ll be a better year than 2011.
I don’t feel that it’ll be a great year for property owners, but it should be better than last year. Why do I think so? I’m glad you asked!
The fall in property prices in 2011 was as a result of a lack of consumer confidence. If people aren’t interested in buying property, then prices will drop until you can interest them in buying property.
The main culprit behind this lack of confidence was the overseas money crisis. We were being bombarded with bad news, first from the US, then from Europe. For the moment at least, the overseas debt situation seems to have stabilised. Don’t expect to see exponential growth in the US or European economies, but I do think we’ll see less fear and alarm around this situation than we saw in 2011.
Australia, and in particular its domestic residential property market, will be impacted to a lesser degree by the overseas debt situation in 2012 than was the case last year.
Secondly, the interest rate environment is improving. We started 2011 with the uncertainty of whether interest rates were going to increase or not. This resulted in less demand for property as many potential buyers stopped attending open inspections and auctions because they were cautious about borrowing/spending money. In contrast to the beginning of 2011, we finished off the year with two interest rate drops. I personally think interest rates will drop at least once, possibly twice, in the first half of 2012. The movement of interest rates is very influential in the Australian housing market as it’s one of the most interest rate sensitive markets in the world. With interest rates at historically low levels and on the way down, this will instill confidence in investors and homebuyers.
Finally, it’ll be the gathering pace of the resources boom that will impact on the Australian economy and property markets in 2012 and for many years to come. Resource rich states such as Queensland, Western Australia and South Australia are positioned to benefit the most, but it’ll also have positive effects for the national economy.
It might be a little too early to get excited about the prospects of the housing market in 2012 and beyond, but the latest figures from RP Data shows that in seasonally-adjusted terms Australia’s capital city home values rose by 0.1 per cent and regional house values increased by 0.3 per cent. Growth of one tenth of one percent in capital city home values is not huge but when you consider that it’s the first time in 12 months that these prices have increased, it is significant. This doesn’t mean that we won’t see drops in some property prices still, but 2012 is shaping up to be a better year than 2011. What do you think?