It’s still safe as houses for Australian property

Media release - 14th October, 2015

Forecasts that the sky is set to fall on the Australian real estate market are difficult to substantiate according to leading real estate Superbrand, Raine & Horne.

A prominent investment bank has reportedly claimed that Australian property prices will fall by 7.5% over the next two years.

“Current demand for property, auction clearance rates and market depth do not indicate a major market correction is on the horizon,” said Angus Raine, Executive Chairman, Raine & Horne.

Auction clearance rates in Sydney, for example, hit 70% last weekend with almost 1,150 properties going under the hammer. This result compares favourably with the same weekend in 2014 where considerably fewer properties went up for auction with 74% selling under the hammer.

Mr Raine believes the odds of an official interest rate cut are shortening given the state of the economies in Queensland, Western Australia and South Australia, and this could underpin real estate market activity nationally.

“There are mining communities hurting in Queensland and Western Australia, while the loss of car manufacturing and oil and gas industry jobs won’t help the situation in South Australia,” said Mr Raine. “

“If we didn’t have the housing boom in NSW and Victoria, it’s a fair bet that Australia’s largest provincial economies would be struggling too.”

“With these economic issues in mind, another interest rate cut by the RBA in the first quarter of 2016 is a possibility, and would give the real estate cycles around the country longer tails that will extend well into next year.”

On Sydney’s Lower North Shore, Hugh Macfarlan, Principal of Raine & Horne Chatswood/Willoughby, agrees that a dramatic drop in real estate prices is incongruous with current real estate fundamentals.

“All the factors that have underpinned the current property cycle are still in place. We have historically low interest rates with the prospect of more to come, a highly volatile share market, along with strong demand for real estate from local and overseas buyers, investors and self-managed superfunds,” says Mr Macfarlan.

“There was a house sold at auction in Chatswood last weekend for $6.055 million, which is a record for the suburb. There is just nothing to suggest that we’re in for a major price correction – rather we believe values will continue to grow, but probably at a less dramatic pace.”

In the Eastern Suburbs, Tony Laing of Raine & Horne Coogee/Clovelly and Raine & Horne Bondi Junction, says the market is contingent on monetary policy.

“If interest rates are cut, which is now a distinct possibility, the current market conditions will prevail. That said, the market continues to be healthy with excellent auction clearance rates the order of the day,” says Mr Laing.

“The only change is that rather than 5 or 6 registered bidders at auctions we have 3 or 4. However that is to be expected given it’s the traditional springtime real estate selling season and the number of properties for sale spikes at this time of year.”

In Western Sydney, Peter Diamantidis, Sales Manager, Raine & Horne St Marys discounts the possibility of a significant property market correction.

“We can’t see prices falling by 7.5% in our region with the values of entry-level houses particularly solid,” says Mr Diamantidis.

“We’ve seen three-bedroom older style houses with sales expectations around $600,000 selling for $650,000, so our market is still strong.”

Asciano, Australia's largest rail and ports company, has announced plans to build a $100 million terminal at St Marys and Mr Diamantidis expects this investment will create more jobs and underpin the region’s housing market long-term.

In regional NSW, Michelle Mackay, Co-Principal of Raine & Horne Bathurst, said a market correction was improbable in her town, with values growing by 7.5% in 2015.

“We are out of residential land and long lists of owner-occupiers are either missing out or are being forced to pay a bit more,” says Ms Mackay.

“Blocks of land in Bathurst worth $160,000 are in some cased changing hands for as much as $190,000. This doesn’t sound like a property correction to me.”

Raine & Horne Bathurst also sold a 20-year old four-bedroom home at 20 Landseer Street, Raglan for $480,000. This property was expected to fetch $420,000.

Days on market in Bathurst are running at 40 days and it’s much faster for some properties, according to Ms Mackay.

“Listings are down by 15% compared to this time last year, so the signs are good for Bathurst real estate for the remainder of 2015 and into 2016.

ENDS

For further media information contact:

Angus Raine, Executive Chairman Raine & Horne on 0409 920 697

Andrew Harrington, National Communications Manager, Raine & Horne, on 02 9258 5400