Auction clearance rates might still be unremarkable for the most part, with none of our capital cities hitting the 70% mark this week, but when it comes to housing and our overall economy Australia is creating quite a stir on the global stage.
According to a recent report from general manager of Australian Property Monitors Anthony Ishac, economically speaking, we are currently the envy of the developed world.
As is almost becoming a given in property circles at present, figures from the Home Price Guide once again show that auction clearance rates continue to perform below the market “norm”.
With the AFL grand final contested in Melbourne on Saturday, it was no surprise that only 12 properties were scheduled for auction, out of which 9 sold to produce a clearance rate of 69%.
Adelaide came in second with 61% after 11 of a possible 18 properties sold, while Sydney had a large volume of auctions, totalling 333 of which only 227 sold, producing a clearance rate of 60%.
Despite these less than impressive figures, we have much to be thankful for when it comes to our current economic situation and housing market. As Ishac rightfully points out in the Domain article, we managed to escape the global downturn relatively unscathed and are now in a position to ride out any more “external economic shocks” quite comfortably.
With the Australian government in the best standing out of all developed nations when it comes to our level of indebtedness, and interest rates back at “average levels”, if the US experienced another recession or China’s economy ran off the rails, Ishac says we still have “levers to stimulate the local economy.”
He says even though foreign financial markets are insisting Australia’s housing market is a bubble waiting to burst, many major retail and investment banks agree that this is not the case.
Ishac makes a compelling argument as to why our housing markets are relatively sheltered from a sudden, dramatic downturn in prices. Firstly, property here only experienced a 4 to 5% drop in values during the global financial crisis, while in the US the subprime lending debacle and massive property oversupply saw house prices plummet by 30% and Britain’s property market experienced a similar fate due to a domestic bank credit crunch.
He adds, “In Australia we have no subprime lending sector to talk about and a significant undersupply of new housing. We have interest rates at levels higher compared with other international economies, so the Reserve Bank could respond to any overseas credit rationing by dropping interest rates again.”
Ishac notes that even if the banks were forced to restrict new lending due to another severe economic storm, it’s not likely that we would see a dramatic rise in the instance of distressed selling as occurred in the US and Britain.
“Homeowners with a mortgage are in a strong position,” says Ishac. “A report from one of the big four banks, considered to be Australia’s largest home loan provider, stated that its average home loan to home-value ratio is only 43 per cent and that 70 per cent of customers are paying their mortgage in advance, and are an average of nine payments ahead.”
Additionally, Ishac points out that Australia currently has strong underlying fundamentals maintaining our property markets, including a continuing housing undersupply, a growing population, decreasing unemployment that’s set to hit unprecedented lows and steadily rising incomes.
“If we also take into account strong gross domestic product, retail sales and consumer sentiment indicators, and low mortgage arrears and delinquency rates, doomsayers will continue to be off the mark when it comes to predictions of house price collapses in Australia,” he says.
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