Well what a month we’ve been having in the Property Investment world. A series of good indicators are suggesting that good times lie ahead. Feedback on the ground is supporting the fact that the market sentiment has shifted across most major capital cities to more active and positive stance.
So what do we see as some on the key indicators that are driving both current sentiment and the near future?
Market activity is strong across most the major capitals. Auction clearance rates are back above 70% with some weekends this month running as high as 78%! These clearance rates are significant because the numbers of properties being sold is also significantly up on the last few years. Excess stock in some cities is starting to be soaked up and others have been selling off the limited supply they have. Supply is still an issue with low vacancy rates and rising rents a signal of growth in sales, with this being made even worse in areas of high immigration.
Interest rates have come down once again with the chance there is even more to come. The RBA seems very comfortable with the inflation figures and with the Australian dollar coming back a little from its highs they definitely have some room to move. The rates are so low that people can fix rates below long term rental yields and have neutral or positive cashflow. This lower cost of lending is also making housing affordability more accessible than its been for years which will just encourage more buyers into the market.
The lending environment is becoming more competitive with the major banks all passing on the entire .25% rate drop to keep up with some of the deals being offered by the second tier and non-bank lenders. We have seen policy in some areas loosen which will also assist more potential buyers to enter the market.
Immigration numbers are also putting pressure on supply and rents as the numbers swell to pre European crisis numbers. Latest Immigration department figures show arrival numbers forecast to hit 491,000 in the 12 months to March 2013. China, India and the United Kingdom are still the largest contributors of immigrants and interestingly over 92% are heading straight to the major capital cities. Melbourne’s population for example has leapt to over 4.25 Million, now just 400,000 behind Sydney and catching. We also seeing the quality of the typical migrant rising with 95% of workers coming Management, Professional or Trade qualified fields.
With all of these indicators aligning, but with many in the broader market still unaware of these factors or still holding on to outdated ideas of how the market was 2 or more years ago, we see a brief window opening for the best opportunities before the market really starts taking off again. We are seeing this even on the ground level with agents confirming increased buyer enquiry and developers getting back to normal sales volumes and lifting prices. The good thing is when we are negotiating for our clients the vendors are still seeing the bright future a little way off yet, so we are securing property at prices we don’t believe we will see again.
If you would like to review your current portfolio or lending position with the view of setting yourself up for the next wave of growth please give us a call.