Abstract
The Australian real estate market is experiencing soft but mixed conditions,
strongly influenced by
economic uncertainty and rising unemployment. The
downturn in Australia still appears to be shallower
than in other
developed countries. The reasons include the generally effective government
stimulus
packages and the relative strength of Australia’s banking
system.
Commercial real estate continues its decline from 2008. Vacancy
rates remain high and rental rates are
low. The federal government’s
plan to financially assist commercial property developers during the
financial crisis was defeated by a vote in parliament’s upper house
Senate in June 2009. However,
Australian commercial property groups
believe the scheme could proceed later, but in a modified form.
The real
estate investment trust (REIT) sector appears to be on the rebound after a
very poor 2008, due to
a recapitalisation. This has reduced the level of
gearing and the selling pressure that was affecting the
commercial
property market.
The residential real estate market is relatively
resilient, especially for first home buyers. This is largely
due to the
national First Home Owner Grant (FHOG) scheme and the extra boost (the First
Home Owner
Boost Scheme) that this received in the federal
government’s recent stimulus package. The states of New
South Wales
and Victoria are also adding ‘boosts’ for first home buyers on top
of the federal
government’s scheme. The federal boost is due to end
on June 30 2009 (although it may be extended),
and this has of course
provided much impetus for first home purchases pre-30 June 2009.
In June
2009, the New South Wales government announced changes in its Budget 2009-10
to cut taxes on
all newly-built houses to further stimulate the housing
sector and relieve the shortage of rental
accommodation. The plan begins
on July 1 2009.
In February 2009, the federal government announced the
Nation Building and Jobs Plan, including
funding for: (a) free ceiling
insulation for around 2.7 million Australian houses; (b) building or
upgrading
a building in every one of Australia’s 9,540 schools; (c)
building more than 20,000 new social and
defence houses; and (d) increased
funding for local community infrastructure and local road projects.
On the
risk side, there is the threat of the expanded FHOG being discontinued from
June 30 2009, as well
as the state ‘boosts’ possibly not being
extended. Also, the FHOG and associated ‘boosts’ could be seen
as artificially propping up prices and activity in the sector. Removing the
boosted FHOG would tend to
decrease house prices. Also, fixed-term home
loan rates are back on the rise. As with the commercial
sector, the
unemployment rate will also affect the housing sector. However, the federal
Treasury sees
housing growth as a main driver of the future economic
recovery.
The total number of dwelling units commenced fell 4% in Q209,
following a revised fall of 11.5% in
Q408, according to the Australian
Bureau of Statistics (ABS). However, both the number and value of
financial commitments for owner-occupied housing have been increasing since
late 2008, so housebuilding
activity is expected to rebound soon. This is
especially the case in New South Wales, with the
new the budget measure to
cut taxes on newly-built houses. Housing industry groups believe this will
deliver a turnaround in the housing industry, at least in New South Wales.
Residential rents have continued to rise in all capital cities. Most major
cities have significant shortages of
rental stock. According to Davis
Langdon, the high-rise residential market (especially in Brisbane and
Melbourne) is beginning to recover, helped again by the FHOG scheme and low
interest rates.
Home auction clearance rates have recently improved in
Sydney. All in all, the housing market continues
to be resilient.
While economic conditions are showing some signs of improvement, these are
unsteady, and uncertainty
lingers. Unemployment remains a concern, with no
convincing signs of improvement. Unemployment
will be a big determinant of
the health of the real estate sector.
The Westpac–Melbourne
Institute Leading Index showed an annualised growth rate of -3.5% in April
2009, compared with worse figures in March and February 2009. This may be an
indication that worst of
the financial crisis is over, and that it will
have been relatively shallow, although a return to economic
growth is
unlikely before 2010.
| 
View Cart
