Mark McLeod’s Market Update
As always, buyer sentiment continues to be heavily influenced by the combination of local area market conditions and the overall macroeconomic environment. In last week’s media, budget fallout continued to dominate the news, with a significant backlash against the Government clearly evident.
Reuters reported consumer sentiment fell to its lowest level in two years across May, according to the latest Westpac/Melbourne Institute survey. Westpac chief economist Bill Evans said the sharp fall in confidence indicates an unfavourable response to the budget, with households worried about finances and future conditions.
The Reserve Bank (RBA) released the minutes from its May meeting, which indicate the official cash rate will remain on hold for some time. Prominent economist Saul Eslake has ditched his forecast for another interest rate cut and now expects the RBA to leave rates on hold throughout this year and next, before raising rates in 2016. The Sydney Morning Herald reported Eslake is among a growing group of economists who have postponed their predictions for a rate increase since the release of the budget, forecasting below trend growth and rising unemployment.
Meanwhile, News Corp reported mortgages have grown faster than wages, with home loan sizes jumping between 50-100% over the last ten years and incomes growing by just 40-75% over the same period. Canster research manager Mitchell Watson says falling interest rates have helped keep repayments under control for now but says homeowners should budget for interest rate rises.
In the property market, an unprecedented number of properties were set to go for sale under the hammer last weekend, with 3111 auctions scheduled across the country. This figure is up 53% on the same period last year. Domain reported the latest ABS data shows investors have poured into Sydney in 2014, despite having already missed the best opportunity for capital growth. Investors accounted for 55.7% of all loans in NSW in March, borrowing just over $12 billion to invest in property. This is a 51% increase on the March quarter last year when just $8 billion in investment funds was borrowed.
The latest finalised auction data from RP Data showed the Melbourne clearance rate of 69% almost topped Sydney’s rate of 70% for the first time in many months. Brisbane cleared at 47%, while Adelaide was at 64%. Volumes in other capital cities were too low to yield meaningful averages.
With the future as impossible to predict as always, we encourage you to carefully review all activity around your property this week in light of the current environment.