Property red hot in 2010 according to economists

Posted on 2010-01-27

 

Australian building approvals rose 5.9 per cent to 13,724 units in November, seasonally adjusted, from an upwardly-revised 12,962 units in October, the Australian Bureau of Statistics (ABS) said on Wednesday. Source: realestate.com.au The rise trounced the median market expectation of a three per cent rise for the month. "Australia is going to be red hot in 2010," ICAP economist Adam Carr said. "I know this is November 2009 data, but we have all the conditions in place to see a very strong housing market - low interest rates, we saw 100,000 jobs created in the last few months, and a housing shortage." "Given this is November data, it's a very good signal." Mr Carr said the November building approvals data would add to the case for the Reserve Bank of Australia (RBA) to lift rates again in February. "I think the RBA will be looking at this number and they'll certainly be looking at the retail sales number tomorrow and inflation numbers on January 27," he said. "A February rate hike is still live." The RBA's interest rate is currently at 3.75 per cent after three 25 basis point moves in October, November and December. The central bank's board doesn't usually meet in January and its first scheduled meeting of 2010 is on February 2. JPMorgan economist Helen Kevans said the market would experience some weakness as the RBA moves to lift interest rates above its current rate towards a "neutral" level of 4.5 to 5.0 per cent. "We'll see some strength in approvals for the time being, but we'll have some weakness going into 2010 as the RBA continues to hike rates," she said. "We're still focussed on a February rate hike." The total number of free standing houses approved fell for the first time since December 2008, slipping 1.9 per cent in the November to 9,386 homes. Meanwhile, the volatile private other dwellings sub-category rose by 27.5 per cent 3,404 units. Master Builders Australia chief economist Peter Jones said that while the big boost in the number of apartments approved was encouraging, the lift was coming off "a disastrously low base". "Investor-driven building of units and apartments continues to be affected by the credit crunch with approvals running at an annualised 35,000 - still 40 per cent below the peak," he said in a statement. "Despite today's figures, the concern is that the fragile housing recovery is still very one-dimensional, and remains hamstrung by tight lending requirements affecting investor-driven unit and apartment builders. "A housing recovery is by no means a foregone conclusion, particularly as the First Home Owner 'boost' scheme phases out." Until December last year, potential first homeowners were eligible for the First Home Buyers boost of $10,500 for existing homes and $14,000 new homes. The federal government scheme was scaled back at the end of calendar 2009 to $7000 for existing homes and $10,000 for new homes.

 

Back to News Archive

 

DISCLAIMER: Every care has been taken to verify the accuracy of the information contained herein, but no warranty is given or implied and prospective purchasers/ tenants are advised to carry out their own investigations. Details herein do not constitute any representation by the vendor. Lessor or the agent and are expressly excluded from any contract.