Welcome back! In our first edition for 2014, we take a look at some of the market indicators that point toward continued buoyancy in the property market.

Whilst nobody expects a similar spectacular rate of growth to that experienced last year, the burst of activity certainly breathed life into the national market and we expect that this will carry through well into 2014.

We keep a close eye on indicators such as;
 

• Stock volume on market – Fewer properties on the market and substantial pent up buyer demand will maintain upward pressure on prices

• Interest rate climate – Interesting that the market has lengthened odds on interest rate rises for the year which means continued historic low cost of ownership for buyers.

• Home loan approvals – Continued upward trending of approvals throughout late 2013, as shown by the ABS, means little sign of market appetite abating.

• The status of the Australian dollar / unemployment figures / consumer confidence – The Aussie dollar continues to trend downwards, easing pressure on exports and manufacturing. The latest ABS force figures show the NSW unemployment rate fell to 5.8%, boosting economic expectations for 2014, according to last month’s Sensis Business Survey.
 

Predictions for the 2014 national property market hover in the +6-9% over the coming calendar year.As always, there will be several critical factors that will be very influential and these have been outlined below.

 

National dwelling growth 2013: As may be seen above the national dwelling price rose an impressive 10.3% during 2013, with much of the growth experienced in the second of the year. It is also interesting to note that the 10.3% was very much driven by the growth of Sydney, Darwin and Perth. Source: RP Data

National dwelling growth 2013: As may be seen above the national dwelling price rose an impressive 10.3% during 2013, with much of the growth experienced in the second of the year. It is also interesting to note that the 10.3% was very much driven by the growth of Sydney, Darwin and Perth. Source: RP Data


 

Sydney: A beacon for national property growth

On the ground, we’re seeing continued robust enquiry and activity amongst both investors and owner-occupiers – all still very active in the market place.

We once again predict that Sydney will lead the way for property growth, with Melbourne and Brisbane following closely. We would also recommend caution for would-be investors in Canberra, Darwin and speculating in mining towns; all of which have a more uncertain future than the nation’s main capitals.

Proper research before jumping into the highly competitive environment continues to be the order of the day for investors and homebuyers. With early signs showing the market still moving fairly quickly, it won’t take long for prospective buyers to be priced out of their preferred areas; especially those who have already stretched their budget to accommodate their property “wishlist” items. While the whole metro area is anticipated to perform well, IPS anticipates a robust 7 – 12% growth across preferred inner-ring suburbs and, in particular, the inner west growth corridor which rounded out 2013 as the top performer.
Loan approvals still on the rise:

The fact that loan approvals are still on the rise is an encouraging sign for the property market. With a growing number of buyers competing for a limited amount of housing stock (property listings began to slow considerably towards the end of 2013) demand will continue to outstrip supply.

 

Source: CBA

Source: CBA


 
Will First home buyers make a return in 2014?

At the tail end of the holiday period, it would seem that there’s a momentary lull in the market. Don’t be fooled. This is typical of the seasonal changeover period as buyers settle back into routine and agents dust off their listing folders and bring pre-Christmas listings (shelved for holiday period) onto the market. Expect to see more listings hitting the market after the long weekend. AFTER a buffeting in 2013, first home buyers may once again find their nerve and re-enter the market. 2013 was a demoralising year for many, with investors and upgraders proving too strong competition many first home buyers, packed up shop and left the market.

The numbers are interesting…

In 2010, a sizeable portion of the market (15%) were first home buyers. In 2013, they were listed on the endangered species list as this figure fell to roughly 8%. We are hopeful that the number of first home buyers will increase and help contribute toward a more sustainable level of growth.

 

Interest Rates to Remain Key:

Much has been said of the historically low interest rates we are currently experiencing. There is little doubt the ability of buyers to lock in low interest rates has contributed to the ongoing upward pricing pressure in the recent past. Market predictions are now that interest rates are likely to remain on hold for the year, rather than the pre-Christmas pricing in of rate rises for 2014.

While the RBA has openly commented that they believe the Australian dollar is too high they remain in a tight position with unemployment likely to rise and recent inflation figures showing 2.7% for the year-to-date. Based on these factors alone, it’s believed that interest rates ought to stay where they are, which should contribute to steady housing growth if the rest of the economy continues on a steady path.

 

Conclusion:

While difficult to foresee the rapid growth of 2014 being repeated, real estate’s recent performance has rekindled Australian’s love affair with property. With all of the above factors taken into consideration, and with the volume of enquiry we’ve received since the New Year, we’re optimistic of another strong year for the market. With Sydney predicted to continue as the market leader in 2014, we expect to see strong organic growth coupled with ongoing tight rental vacancy rates.

With more and more buyers returning to the market, it’s as important as ever for buyers to take the time to research their chosen area, select the right asset for their investment objectives and get their due-diligence in order before making offers or bidding at auction.

Regardless of whether you’re a homebuyer or investor it’s crucial that you establish the correct market value of an asset and head into negotiations giving yourself the best possible chance of securing its purchase ahead of the competition.

Wishing all of you a prosperous 2014 and we look forward to providing all of our clients with continued market commentary and property investment advice and guidance throughout the year.

 

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