RP Data Market Report Australia 2010

Tim Lawless is the National Research Director of www.rpdata.com and is one of the most quoted commentators on the property market today. Tim is regularly called upon for his market knowledge of the Australian property market to advise major clients across property, banking and finance organisations.

Looking forward, the key indicators for the remainder of 2010 show that the property market is looking reasonably healthy:

• Mortgage interest rates look like they should remain stable at the decade average for the remainder of the year with the ASX Cash Rate Futures suggesting a fairly flat interest rate environment to the end of 2011.
• Unemployment has well and truly peaked much lower and earlier than officially forecast with a current unemployment rate of 5.2%.
• Population growth remains very strong with more than 430,000 new Australians recorded over the year to December 2009.
• Housing supply remains well below what is required. The latest estimate from the National Housing Supply Council suggests an undersupply of more than 178,000 dwellings. Building approvals for new dwellings have shown some recent improvements, however new approval levels remain well below what is required.

Balancing the positive factors outlined above is the fact that consumer confidence is deteriorating due to the increased level of uncertainty surrounding global financial markets and the higher interest rate environment compared with last year. The combined effects of the positive and negative influences are likely to result in a modest growth environment for Australian housing over the remainder of 2010.

The market for investors is likely to remain attractive. With affordability constraints once again hitting the market we are likely to see more demand flow into rental accommodation.

Higher demand in rental markets together with vacancy rates remaining below 2% across most capitals should see rental rates improving over the coming year. The by product of higher rents and lower capital gains is likely to provide an improvement in rental yields for investors, and landlords will likely be looking to improve the rental return from their property upon lease expiry.

With the anticipation of less competition in the market during 2010 and the likelihood of improving yields, we expect investors to become more active and pick up some of the slack from the falling number of active first home buyers.