Real Estate values up but another rate cut would help

By Angus Raine

The pieces of the puzzle are falling into place for homeowners considering a property sale, following news that home values rose by 3% over the first half of 2013.

According to RP Data research director Tim Lawless, the capital gains highlight that lower mortgage rates are starting to have a positive impact on the housing market.

Interestingly, if you dig deeper into the research, there are some really interesting trends that jump out. For example, RP Data said the Sydney premium housing market has bounced back since the start of the year with values up by 4.8% over the past six months. While RP Data attributes some of the bounce to a correction, it’s also fair to expect that the falling Australian dollar and stronger share market returns have helped.

The falling dollar is attracting expatriate and foreign interest in prestige homes, while Raine & Horne agents are reporting more investment bankers and portfolio managers at open for inspections.

It’s also worth noting that each capital city housing market, excluding Hobart, recorded increases in values over the last financial year, which concluded on 30 June, with Darwin (6.1%) and Perth (6.0%) the big winners, according to RP Data.

While it’s pleasing to see the uptick in the market, it’s essential that the Reserve Bank continues to do its bit with another interest rate cut to reinforce improving buyer confidence in many property markets across Australia over the cooler months.

At the same time, a property sale in August could be a good option for committed vendors, as there is a shortage of winter-time listings in many real estate markets around Australia, yet buyer demand remains consistent.

Looking ahead, official interest rates look tightly correlated to the Australian Dollar, according to Paul Bloxham, Chief Economist (Australia and New Zealand) from leading global bank, HSBC. “If the AUD falls further it may obviate the need for more rate cuts,” said Mr Bloxham. “If it stays around its current level (or lifts), we see the RBA as likely to cut rates further.”

That said, the Reserve Bank isn’t a huge fan of an August interest rate cut. In fact, you have to go back to 2007 to find a move on interest rates in the eighth month of the year. Let’s hope this year the RBA board decides to change this trend, as another drop in rates will help underpin growth. 

Angus Raine is a leading commentator on the Australian property industry and has been CEO of the Raine & Horne property group since 2006.

Mr Raine started his real estate career over twenty six years ago, previously working with three blue-chip international real estate firms, before becoming director of Raine & Horne Holdings Pty Limited in 1998.
Mr Raine is an accomplished real estate specialist and his academic and industry qualifications include a Diploma of Business (Valuation) and a Diploma of Business (Franchising). He is also a registered valuer, a Fellow of the Australian Property Institute, Member Royal Institution of Surveyors (MRICS), and a licensed real estate, stock and station business agent.
Angus is a Graduate of the Harvard Business School’s Owner/President Management Programme, and has a professional certificate in Advanced Corporate Real Estate (API/UWS).
Since 2000, Mr Raine has been a committee member of the Family Business Association’s New South Wales chapter.