The brakes may be coming onto what has been a buoyant start to the residential property market so far in 2013.
The outlook for the residential market is uncertain according to the most recent figures from the Westpac Melbourne Institute Index of Consumer Sentiment, despite Ray White Belconnen recording their sixth consecutive Auction with clearance rates in excess of 60% last week, and with an overall clearance rate for 2013 of 73%,
May figures showed a drop of 7 per cent, following on from a fall of 5.1% in April which now has the index sitting at 97.6 points – the lowest reading since August last year. When the index drops below 100 it indicates that pessimism levels are higher than optimism levels.
Also likely to have an impact on the local housing market is that change to the First Home Owners Grant (FHOG). From 1 September 2013 the FHOG will be increased from $7,000 to $12,500 and targeted only at new or substantially renovated properties.
It’s not all bad news for First Home buyer though, with the income threshold for access to the governments stamp duty concession being lifted from $150,000 to $160,000 per household. There is also an increase in the cap to include properties up to $525,000 and changes kick in from 5th June.
We anticipate that the changes to the FHOG will cause some first home buyers to look only at new properties, which has the potential reduce some of the momentum in the lower end market (up to $450,000), as investors will no longer be forced to compete as hard for properties. However the great equaliser is historically low interest rates which is adding demand to the residential property sector, and forcing some investors out of cash and chasing a better yield in the housing market.
In conjunction with higher Auction clearance rates, the other positive news is that property inspection numbers have remained consistent – even as we enter the typically slower cooler months.
We believe that until the Federal election is out of the way and we know for sure whether the ACT job market stands to lose the 6,400 jobs that have been reported, an element of uncertainty will remain, but with affordability being a key factor in demand for housing buyers want to be careful of remaining on the sidelines for too long.