May proved a relatively positive quarter for Australia’s housing market. A snapshot of the May statistics is presented in Table 1.
Of the house markets, the Hobart market recorded the strongest quarterly growth gains in May with the median house increasing in value by 2.59%. This was followed by Country NSW houses, which posted 2.39% growth for the quarter.
In the unit market, the median Hobart unit increased by a shocking 6.66% in the May quarter. Regional Queensland was a very distant second, where median units increased by 2.44% over the same time period.
The growth numbers for May are not as high as what was achieved in recent months. In fact, there are a number of capital cities that have fallen in value. However, the monthly numbers are “beautiful” as far as I am concerned and they are what I had been hoping for.
Table 1 presents the Australian-wide outcome for May 2014.
The much dreaded Federal Budget has been presented and from a housing market perspective it is of little consequence. There was nothing that directly, or for that matter indirectly, impacted on property prices. However, the reduction in the corporate tax rate to 28.5 per cent from July 2015 adds a pressure to consider investing under a corporate structure where an investment property is not negatively geared. This is particularly so where the investment is going to be held for a considerable period. The difference between the discounted (50 per cent) capital gains tax (CGT) personal marginal rate and the corporate tax rate is now minimal and over time the benefit of the lower corporate tax rate on income could relatively quickly absorb the positive CGT discount benefit.
We waited with anxious anticipation for consumer sentiment to improve last year as housing markets should have been performing well in early 2013, but this was not the case. Interest rates were low, which has historically caused property growth spurts. Gradually, sentiment improved and property markets started to show strong growth moving into the last quarter of 2013.
However, recent data indicates that Sydney, the lead indicator market, is starting to look soft and as though it has peaked (see Graph 1).
Tis the season to be jolly’ with this year’s Christmas bringing good news to our property market!
Rents are down and there is capital growth in most capital cities. All players in the market will be, or should be happier and feeling more comfortable about their financial positions. This situation bodes well for a happier Christmas with things looking as though they will be better than they have been for a number of years.
All is going well for Australia relative to most developed countries of the world. The Reserve Bank and the government should be comfortable with the transition process taking place as the country moves away from the mining boom to a more normal economy.
It was only about 18 months ago that the housing market was full of gloomy news. Many of the worst performing areas in Australia were on the Gold Coast where there was a significant oversupply of stock and values had fallen by amounts not seen since the Great Depression.