MARKET WRAP: Issue 12: June 9th 2016
Over the past few months we have covered ‘The Five Fundamentals That Drive Real Estate’, all of which culminate in the most important ingredient for real estate, and that is, consumer confidence.
Has The Federal Budget & Reserve Bank Affected Consumer Confidence?
The two research houses that monitor consumer confidence, being Westpac Melbourne Institute of Consumer Sentiment and Roy Morgan, have both released figures showing a rise in consumer confidence. Westpac recently released a report mentioning that consumer confidence has jumped by 8.5% in May, which was the largest monthly gain since mid-2010. This has now resulted in consumer confidence being at the highest level since January 2014.
Further research shows the pick-up was in reaction to the Federal Budget and the Reserve Banks cut in interest rates. It also states that job security figures have eased, as employment rates have trended lower. Interestingly, there was a 15% lift in the confidence of respondents who have a mortgage and as a sub-index shows there has been a 6.6% rise in people’s perception, being now is the time to buy a dwelling.
There is no question that a drop in interest rates would have been the largest driver to the current increase in consumer confidence. The Reserve Bank strategically dropped interest rates purely because of the underlying inflation, which was trending at 1.5% in 2016, this is below their target range of 2%-3%. The current forecasts are predicting an inflation to only move into the bottom of that band sometime in 2017. As a result, the Reserve Bank felt the economy needed some stimulant.
It is suggested that the next set of figures will show a downturn in consumer confidence, due to the negativity circling during the election campaign. However, it is expected to see a rise after the July 2nd election.
Is This Good News For Mortgage Arrears?
It is the tale of two stories here, the latest reports show that some owners are up to 2.5 years ahead on their mortgage repayments, as a result of the record low-interest rates.
On the flipside, other figures recently released revealed the number of Australian housing loans in arrears has risen for the 5th consecutive month. It is a very low number with 1.13% of prime residential mortgage-backed securities in arrears and that is up from 1.11% in February. The good news is that arrears remain below the decade-long average of 1.25%.
How Is The Gold Coast Market?
The last bit of information for this report is specific about the Gold Coast. The annual dwelling sales for the year to February 2016 was 19,516, which reflected an increase of 7% in the volume of sales and 24% above the five-year average for the region. Housing sales were 44% of the total, whilst unit sales were 56%. Medium values over the year to March 2016 saw an increase of 7.2% in house values and 4.8% in apartment values. The housing rental yields are up 5.1%, which is certainly better than money in the bank, and the 12-month rental change is up 4.2%. Furthermore, the apartments rental yield is 5.9%, this is an increase of 5.4% over the past 12 months.
The last three months for the Ray White Surfers Paradise Group has resulted in our three all-time record high sales months, with May holding the record of our biggest sales month ever with just over $135million in sales. That figure is three-fold the sales that occurred the same time last year, which does give some indication the market activity. We congratulate all of our teams for following our programs to deliver outstanding results for our clients and subsequently increasing our market share. Very proud of the team.
See you in a fortnight’s time.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group