Strong sentiment is providing a positive outlook for the housing market, the latest national property confidence index shows.
Low interest rates, a solid rebound in housing market activity and continued offshore investor demand have cumulated in a rise in confidence, lifting the index to 132 in the December quarter from 121 in the previous quarter.
The most recent Property Council of Australia/ANZ Property Industry Confidence Survey shows that the housing market is at the early stages of a solid cyclical upturn, buoyed by low interest rates, tightening housing market supply/demand fundamentals and improved affordability.
Following an extended period of weak housing sales in 2012, sales market activity has surged in recent months and house prices have posted solid increases, with elevated auction sales and clearance rates, lower days on market and increasing housing finance reflecting renewed home buyer and vendor confidence.
Reflecting the recent strength in housing market momentum, expectations around house prices and building activity increased sharply in the current quarter to the highest point at a national level in the survey’s history.
In a release accompanying the findings, ANZ Chief Economist Warren Hogan said that despite speculation by some commentators that strong recent price gains in some markets represent the early stages of a house price bubble, price gains on the whole remain largely explained by sharply improved affordability and the release of pent-up sales demand created over recent years.
“While an extended period of low interest rates and further tightening of housing market fundamentals should support further price gains in the year ahead, difficult home deposit affordability, elevated unemployment and household and lender caution are likely to cap price gains relative to earlier recoveries”, Hogan said.
Nevertheless, he warned that the upturn in housing construction is likely to be modest.
“A de-synchronisation of state housing market and dwelling type cycles will restrict the rebound in national dwelling investment.
“Rising vacancy rates and growing valuation risks in some markets are likely to slow apartment completions in particular”, he said, adding that the issues that have plagued the industry in recent years largely remain in place (such as difficult approvals processes, excessive developer contributions, inadequate land availability, infrastructure shortages, capacity constraints in key trades and tight credit conditions).