2013 under the microscope
Property observers are largely in agreement that the Australian property market, as a whole, saw a turn midway through 2012. Since then, the market has been a story of low interest rates and years of pent up demand finally being released onto the market.
“The market has been keeping under wraps for the last three years, generally speaking, and in 2013 there was a change in the underlying nature of its supply and demand drivers,” says Australian Property Monitors senior economist Andrew Wilson.
According to Wilson, markets with strong underlying factors performed better over 2013, while those with less strong underlying factors performed weaker. That may have been no surprise given that this is how housing market cycles typically run their course, but the difference has been in the gulf between strong performing markets and flat markets, with the former being isolated to only a few key markets.
“Markets have been headed the same direction more or less, but the gears have been different. There’s a multi-speed scenario unfolding in markets and there has been a divergence in housing market activity. Some markets have clearly been engaging buyers at a much higher level,” Wilson says.
The stand out performer has been Sydney. Other markets may have grown at a faster rate, but since they aren’t as big, they haven’t been pushing the entire Australian real estate market up in quite the same way.
BIS Shrapnel figures have growth in the Harbour City’s values at 7% over the year, a rate of growth that hasn’t been seen in Sydney for years.
Driving that growth has been a severe shortage of housing and other capital cities with the same problem saw similar results. This explains growth in Perth (+6%) and Darwin (+7%).
However, the real surprise was Melbourne. “We expected Melbourne to stay weak, but it’s definitely had a rebound driven by low interest rates,” says BIS Shrapnel’s Angie Zigomanis.
That rebound saw Melbourne values climb 8% over the year, despite the market having lesser demand pressures.
In the majority of markets, save Perth, first homebuyer activity has been subdued and below long-term levels. This was despite a slew of interest rates cuts that trace back to November 2011 and put the cash rate at an historic low of 2.5%.
Usually low interest rates bring first homebuyers into the market, but 2013 saw the emergence of an Aussie real estate market dominated by investors and upgraders.
“A lot of that is a perception that now is a good time to buy,” says Wilson. “Prices in many areas are still below what they were three years ago and there’s been a value opportunity perspective from investors.”
2013 in nutshell:
- Most capital city markets saw a recovery
- Interest rates fell to historic lows
- Investors and upgraders responded to low interest rates strongly
- There was little growth in the first homebuyer market
- Unemployment grew
- Markets with a shortage of housing will continue to grow
- Capital cities that have benefitted from a lot of resource investment activity may start to see an easing off of growth, although they should still perform reasonably well
- Interest rates are forecast to stay low
- The economy is expected to grow at a more modest rate
- Job markets may soften, with the unemployment rate likely to grow modestly