Residential property market buoyed by encouraging forecasts
2012 could see the beginning of a "sustained turn-around" in some residential property markets across Australia, according to a senior economist.
Andrew Wilson of Australian Property Monitors noted a number of encouraging figures in the organisation's most recent housing report, which showed a marginal increase in national median house prices during the last three months of 2011.
This, he noted, represents signs of improvement after five consecutive quarters showing falling house prices.
"This result is significant as it shows an end to a recent trend of falling prices over the past year, with the realistic potential for a sustained turn-around in some markets," said Wilson.
His statements were echoed by Tim McKibbin, chief executive officer of the Real Estate Institute of New South Wales, who recently identified a "promising start" to the new year when it comes to residential property sales.
While residential property activity is always "characteristically low" during the summer holidays (the period between December 19 and January 28 this season), a clearance rate of 59 per cent at the 377 reported auctions held across NSW during this time indicates that sellers and buyers are "keen to make a deal".
A further 500 private property sales were finalised during each week of the break, he noted, adding further fuel to his argument.
Activity has particularly picked up in the Sydney and Melbourne housing markets, according to Australian Property Monitors. Median prices held steady in Sydney during the December quarter, while Melbourne saw the largest rise in capital city median house price growth with a rise of 1.1 per cent. And in Queensland, news that the Building Boost scheme will be extended by a further three months is likely to assist "hundreds" of prospective property buyers, according to Real Estate Institute of Queensland chief executive Anton Kardash.
Consumer confidence was further boosted thanks to two consecutive cuts to the cash rate of 25 basis points each in November and December last year - and many economists anticipate that further cuts can be expected later this year, following the Reserve Bank of Australia's monetary policy committee decision to hold rates steady on February 7.
Speaking on December 6 after the last monetary policy committee meeting, governor Glenn Stevens asserted that while European economic uncertainty has been dominating headlines in recent weeks, there are still a number of positive factors to bear in mind when it comes to the Australian economy.
Demand growth is exceeding trend, while output growth is also close to hitting this figure. Meanwhile, the booming resources sector is attracting investment - with more expected to come in the weeks and months ahead.
Lending rates in December were at their average level of the past 15 years, he added, due in part to the cash rate reduction made in November - which was subsequently passed on by lenders. Furthermore, the Australian dollar remains at an historic high.
In fact, the Australian economic climate is in a good position to weather any further uncertainty that comes our way.
Unemployment, according to the Reserve Bank, has actually remained close to five per cent and "better-than-average" conditions have been recorded in some sectors. Encouragingly, inflation is likely to remain in line with the two to three per cent target set for 2012 and 2013, Stevens added.
Another signal that the market may be on the road to recovery is an upswing of land sales recorded in the most recent HIA-RP Data Residential Land Report.
Andrew Harvey, senior economist at the Housing Industry Association (HIA), pointed out that land sales volumes have increased for three consecutive quarters - adding that this could be a sign of further recovery in the overall property market.
During the September 2011 quarter, the volume of land sales increased by 1.3 per cent - a figure which may rise even further with future cuts to the cash rate.
Harvey's statements were echoed by Cameron Kusher of RP Data, who asserted that the shoots of recovery recorded in December 2011 are likely to carry over into the new year as the housing market gains momentum.
Land sales, he explained, tend to be "an early leading indicator" that new home building activity will also pick up - and other sectors stand to benefit as well.
Kusher said: "Any improvement in land sales is an encouraging development for the housing construction industry while there are also positive flow-on effects."
He added that people who build new homes also tend to spend money on homeware, furniture, new electrical goods and even hardware.
"Should the improvement in land sales continue, it is likely to provide a much-needed boost for retailers," he concluded.