Andrew Bell’s Market Wrap: What Has Winter Meant For The Property Market?

There is no question we have seen some readjusting in the marketplace at present. There is no clear reason for that and whilst some speculate it could be the midyear seasonal slowdown, that is not apparent to us as we actually have quite a supply of ready, willing and able buyers who are just expressing some resistance to the current prices being asked in the marketplace.

What is more important is the market itself. The fundamentals for the property market are about as sound as they could ever be.

Recent business indicator components of GDP came in better than expected, reflected in areas such as gross operating profits in the mining sector up 5.9%, retail sales for April growing by .4%, and a surge in non-resource companies raising money from the bond market, which is a sign of growing confidence in the outlook across business where we see corporate borrowings running at near record levels. Top that off and we note that GDP rose 1% from the December Quarter and up 2.8% from a year earlier.

The jobless rate also fell to 5.4% in May with 12,000 new people finding jobs. Our Reserve Bank Governor recently said that conventional wisdom puts full employment at around 5%. We are getting mighty close to that.

We know we have been waiting to see some wages growth as that will put more money in consumers’ pockets. Well, rising company profits is showing signs of being shared across the expanding workforce, with the largest annual rise in wages and salaries paid since the commodity price boom six years ago. The growth of national wages and salaries accelerated to 5.1% in the first quarter of this year and was up from 4.4% in the December quarter.

That is quite a flurry of good and positive economic news and will be the foundations of the real estate market activity moving forward. This has led to an interesting scenario. It was clear that APRA wanted to manage a significant slowdown in real estate price growth. Rather than putting interest rates up, which by the way the Macquarie Bank suggests will remain at their current levels until at least 2020, APRA has created a credit squeeze; less money available to lend for real estate purchase. That is being done through tighter regulations around the lending process with stricter application forms, a greater need for proof of earnings, current assets and liabilities and so on. There is no doubt that has had an effect in the real estate market as well and this credit squeeze may well be us for a year or more yet to come.

Interestingly, our volume of sales is only down marginally, but what is very evident is that it is now taking anywhere up to a month for people to get finance approvals, and so our buyers and sellers are having to get use to an unusual situation that hasn’t really been seen since the 1970’s.

It is just more of the same where the world is constantly going through change and we all have to get used to an ever-changing playing field. What won’t change is that everyone needs a roof over their head, whether they rent it or buy it, and that businesses need premises to operate from, whether they rent it or buy it, and so there is always a constant demand that just has to work through some of the challenges that are occurring in the market from time to time.

Thank you for your support!

I want to take this moment as well to thank everyone for their generosity in my recent CEO Sleepout. Yes, it was really cold, but what was worse was sleeping on the concrete floor, now that was painful. However, I am pleased to see our Gold Coast CEO’s raised some $450,000 towards the homeless for this year and that will make a difference in many people’s lives. A shelter was purchased out of last year’s fund which provides short-term housing for those escaping domestic violence and so on. So rest assured it does get put to good use very, very quickly.

Until I am with you in a fortnights time, all my very best.