rpdata.com’s weekly measure of professional activity in the property market, the Market Activity Index, has continued to increase during the most recent week and now sits at a value of 73.6. At the same time 12 months ago the Market Activity Index was sitting at 53.9 points so the results show the market is much stronger than it was at the same time last year. Activity still has a long way to go to return to the heights of late last year but the early indications are very positive that the residential market is kicking off earlier than expected in 2010.
Industry Market Wrap
Westpac and the Melbourne Institute released their Consumer Sentiment Index this week which showed sentiment had increased by 5.6% during January 2010. The index now sits at 120.1 which is only the second time it has been recorded above 120 points since July 2007. A subset of the Index which measures confidence of mortgagees sits at 127.3 points which is the highest level in more than 15 years. There was some concern that rising interest rates were causing consumer sentiment to fall following a drop of -2.5% in November and -3.8% in December however, given strong employment and economic figures released, the Index recorded a strong increase during the month.
Moving forward the Sydney Futures Exchange’s Yield Curve for Cash Rate Futures shows the market expectation is that the cash rate will continue to increase and is expected to sit at 4.42% by June 2010. Given the current gap between the cash rate and interest rates, this would result in a standard variable rate of 7.3%. The rising interest rates which are likely to make finance harder to come by is anticipated to have a dampening effect on Consumer Sentiment as has traditionally occurred when interest rates rise.
Most people know by now that last year saw unexpectedly strong levels of property value growth bought on by 49 year low interest rates and the First Home Buyers Grant Boost. Across all capital cities and all property types property values have climbed and in most instances sit at their highest ever level. The last quarter has also seen strong growth with Perth units the only exception falling in value by -1.0%.
National auction markets are only just starting to revive after the festive season break, so volumes remain quite low. The number of auctions scheduled over the coming weeks is already showing a ramp up which will be reflected in our auction results over the coming weeks.
Want to know the auction results for your local area? Log into rpdata.com and go the Auction Results panel on the top right corner of the home page.
Total properties listed for sale remain well below levels from 12 months ago. During the month to 17th January only 162,879 properties were listed for sale compared to 197,668 at the same time last year. Clearly there are fewer properties being re-listed but supply of new listings is also well down. The last month has seen just 15,286 new properties advertised for sale, yet at the same time last year there was an additional 11,000 new properties advertised for sale. .
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Yields eroded during 2009 as capital gains
outpace rental growth
A feature of the property market during 2009 has been strong value growth in many capital cities, significant first home buyer activity, falling rents and subsequent yield erosion.
The indicative gross rental yield is a measure used by property investors as a guide on what level of rental return they are likely to earn on a rental property. The calculation is simply the annualised weekly rent divided by the median price with the resulting figure expressed as a percentage. On a suburb-by-suburb basis the median price is used but across individual properties most owners will use the purchase price.
Blog: Overseas real estate markets are recovering but prices remain well
below their peak
As the global economy continues to recover, we thought it timely to re-examine the overseas property markets that we as Australians often use as reference points. Rightly or wrongly, Australia’s residential market is often compared to that of the US, UK and New Zealand. Of course there are significant differences in the market drivers and detractors that generally relate to the financial regulations, supply/demand balance, taxation rules, state of the economy and interest rates; however it is still interesting to see how our market compares.Australia’s most popular tourism regions are hurting – takings from accommodation are down, occupancy rates are down, overseas visitor numbers are only creeping up (slowly) after the 2008 slowdown. The Tourism Forecasting Committee (part of Tourism Australia) estimates that total tourist consumption is down 3.5% in real terms during 2009 – the worst downturn in the tourism sector since the outbreak of SARS back in 2003.
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