MARKET OUTLOOK Other indicators that the market is stabilising include:
• Vendor discounting has reduced from 7.9% to 7.1% showing vendors are becoming more realistic in their price expectations. Across capital cities, vendor discounting levels for houses were lower than for the corresponding time elsewhere. Discounting levels for units are the same as the previous year in Sydney and lower in Brisbane, Perth and Darwin. In Melbourne, vendor discounting levels are much higher than they were the year before, but it must be remembered this city experienced the highest exponential growth over the longest protracted period in the preceding years. • Days on market has fallen from 70 days - for a capital city home - down to 63, evidence there is still glut of houses on the market not moving as quickly as they should, but improving. 41% of members say average number of days will remain steady but 32% suggest they will fall, which is great news for vendors. The greater proportion of Queensland and Western Australia members expect them to fall, while in South Australia they are evenly split between falling and steadying. In Victoria, the greater proportion of members expects them to steady, while in New South Wales the greater proportion expects them to rise. Tasmania and Western Australia members are unanimous that their average number of days on market will rise. • Industry data shows auction clearance rates improved in the first six months of 2012, levelling to around 50%. Housing affordability is continually improving, mainly as a result of the combination of interest rates reductions, declining home values and growth in disposable income. Affordability improved for the fifth straight quarter by the end of March this year, according to industry figures. The March quarter Housing Affordability Index was 11% higher than a year ago. In that quarter, lower interest rates and softer prices all helped improve affordability. This improvement was diluted by banks widening the margin between mortgage rates and the cash rate – a gap set to widen further when interest rates go down in the second half of 2012. These factors will continue to improve affordability. Industry data shows households are paying on average 3.25% more than the cash rate for their loans, higher than during the GFC. All State Chairs agreed interest rates would be cut further in the coming six months, but 75% of them said this would not be enough to boost Australia’s property market on its own. Only Western Australia and New South Wales chairs said interest rate cuts alone would improve the market. While interest rate cuts are no band-aid solution, they can provide substantial assistance in restoring confidence and activity.
06
FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK – MID YEAR UPDATE