Joel Davis,
Strategic Director at Image Property.
Australian economy roaring back to life
By Joel Davis, Image Property
How many times can we hear, “We’re in uncharted waters; these are unprecedented times,” before we want to poke someone in the eye?
Well, here’s one more to add to the pile, but it’s actually tied to very good news.
Following the sharpest drop in GDP since the 1930s, for the June quarter last year, we’ve seen the strongest consecutive quarterly growth since the national account figures began in 1959 – posting 3.4 per cent growth in the September quarter and 3.1 per cent growth in the December quarter.
But, make no mistake, this is no dead-cat bounce – this is strong, consistent (well, the start of a consistent trend) economic growth and signs that our economy can get back to pre-pandemic levels.
All the indicators are there – an uptick in agriculture output, construction edging up thanks to state and federal grants, a huge rise in resources sales and, crucially, labour force statistics are favourable, with a drop in unemployment and underemployment figures.
What does all this mean for the property market?
Well, even Blind Freddie can see that property prices are strengthening.
Demand is strong as the low-interest environment encourages buyers to explore the market.
According to the CoreLogic Home Value Index for February, Australian home values surged 2.1 per cent higher in February – the largest month-on-month change in its index since August 2003.
Over the past year, the Brisbane median dwelling value has strengthened by five per cent and on the Sunshine Coast by a higher percentage still.
In Brisbane, we’re seeing the middle-tier – the $500,000 to $750,000 price range –facing the strongest demand we’ve seen in many years, while demand for property on the Sunshine Coast also far outstripping available supply.
There is absolutely no doubt that there is plenty of confidence in the housing market, with most of the interest at the moment coming from owner-occupiers and first home buyers.
Investors are also making a return now, too, which will just add more pressure to property prices.
Future movements
How the strong economic growth will impact the market looking ahead 12 to 18 months will depend on interest rates.
RBA Governor Philip Lowe has signalled emphatically that rates will remain low for some time to come.
The RBA has been super keen to get credit sloshing through the economy and to see consumers spending throughout the pandemic.
Since then, the economy has rallied even more spectacularly than the central bank could have hoped for.
So much so that most financial markets are now betting that we might see a rate rise earlier than the previously forecast time period of 2024.
A rate rise may come in late 2022 or early 2023, if the economy continues to demonstrate resilience and robust growth, but that doesn’t mean that markets will suddenly falter.
Rather, if you’re a prospective property buyer, either considering your first purchase or perhaps an upgrade, it’s time to think seriously about where you’d like to buy.
Conditions are almost perfect for a property purchase, with strong price growth expected for the next few years.
This means it’s the ideal time to find that gem that will grow in value and help to create wealth over the medium- to long-term or to sell a property to realise the potential for strong capital growth.
