Economy

Jan 14, 2013

No surprise the property market isn’t picking up

When interest rates are low, it stands to reason, expected growth in the economy is waning. Which doesn't inspire anyone to take a punt on growth assets, writes market analyst Catherine Cashmore at Property Observer.

Speculation has been rising in the housing industry since the RBA made its last 0.25 percentage point cut to the cash rate, bringing the official figure to the post-GFC 2009 “emergency” level of 3%. Now with rumours the banks may move outside of the central bank’s cycle and make “self-initiated” rate cuts of their own, industry professionals are declaring a better year ahead for property prices than experienced over the previous two — and thus we start the crystal ball gazing.

But the standard variable mortgage rate remains some 0.6 to 0.8 percentage points above that of 2009, when it was sitting at 5.55% and prices were rising sharply. Additionally, the strong Aussie dollar is still affecting our terms of trade, and although unemployment data has improved of late (falling to 5.2% in November 2012 from 5.4% in October), Victoria’s results aren’t so positive.

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6 comments

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6 thoughts on “No surprise the property market isn’t picking up

  1. Kristian

    On the face of it, I agree with just about everything you’ve posited here, but I’d really like to see some supporting evidence. Are there any links missing in the translation from the Property Observer site?

  2. Suzanne Blake

    Catherine

    Everything will pickup after the election, or just before when the result is an absolute given, if it is not already.

    People and business needs confidence and a change in Government

  3. Freddy T

    Hey Glen…. The economy is stuffed. Look at the window of your ivory tower.

  4. Hamis Hill

    Property industry specialist articles aside, politically, the expectations of a change in government this year imply a return to the Howard-Costello golden era of ever-rising house prices,ie Capital Gain,to offset the interest bill on mortgages.
    Assett Price Maintenance, the collusion of the Housing- banking cartel of the Howard years, has beeen patchy post- GFC, with a prominent developer of riverside apartments in Brisbane declaring that there are no Australians in his market.
    So, in order for the political promises to come true for the Coalition, the entire focus of future sales must, (for the sake of that Assett Price Maintenance and Bank shares in general), be sales to foreign buyers eager to park some cash in a stable political environment.
    Australians have become used to foreign ownership of farms and mines and certainly housing affordability for the ordinary run of the mill voter will be taking a second place to maintaining the mortgage values of the mortgage lenders.
    The Coalition, with its close connections to the housing speculation/banking industry has this in the bag.
    Australians cannot afford housing now after the Howard era
    but the burgeoning Asian Middle classes can.
    This is the extent of the Coalition’s engagement with the Asian Century, to simply and profitably facilitate the transfer of ownership, while obscuring the effects upon national sovereignity.
    It is their business after all.

  5. Strachan Taylor

    Catherine, I agree with much of what you have put forward, in that
    1, the RBA cash rate is primarily a response to the market to either temper or stimulate and not ‘the driver’ of the market. and
    2. other key factors in the past, such as unheard of easy access to credit, miss pricing of risk, demand outsrtipping supply etc were the primary drivers of house prices over the last 2 decades. However very disappointed that you wouldn’t apply your analytical mind to take a punt on the year ahead. Nothing to lose there. If you are wrong, great content for an article on why? What changed etc. IF you are right you are a star…

  6. Hamis Hill

    Perhaps housing, per se, is too closely connected to the very intestines of politics for professional commentators, who may wish to remain employable, to risk close contact.
    Ever increasing house prices, with “sanctified” millionaire status accruing to ordinary Joes lucky enough to get several families of working stiffs to pay off the serial mortgages for twenty-odd years, has become, after sport, the second largest secular religion in the nation.
    (A variant on gambling certainly, and, as Adam Smith pointed out, in itself an indication of an “Old” or geriatric economy in which all other profitable economic niches have, long since, been occupied).
    Those with deeply vested interests in such a “religion” can reasonably be expected to be irrationally vicious to curious scribes flying too close to the secret centre of such a political cyclone.
    Better to stay at a safe, “conservative” distance.

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