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June 07: Fit or failing? The Australian property market uncovered

Staff Reporter 3 minute read

With headlines claiming Australian housing affordability to be at its lowest in 23 years, Mortgage Business caught up with Rod Cornish, head of property research at Macquarie Bank, to find out how the property market is holding up.

It’s a bad time to be getting into the property market, if you believe the statistics. Recent figures released by the Commonwealth Bank and the Housing Industry Association reveal housing affordability to be at its lowest since 1984, with borrowers at least 10 per cent worse off than they were 12 months ago.

Head of property research with Macquarie’s The Real Estate Group, Rod Cornish agrees that affordability is lower, but suggests that these statistics don’t actually provide a true reflection of the housing market.

“Housing affordability may be lower at the moment, but we’re certainly not in the same situation as the 80’s,” says Cornish. “Using more appropriate comparisons we can see that home owners in 1984 were spending up to 60% of their weekly income on their mortgage whereas the latest figures for today are almost half that, at around 30.8%.”

Cornish claims the market is actually in a period of moderate growth, with home owners capitalising on the best auction clearance rates since 2003.

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“Prices are picking up gently on the Eastern seaboard, and starting to moderate themselves on the West coast where there was an exceptional growth cycle. We’ve seen good results for the first half of 2007, especially in properties located close to CBDs,” he says.

New trends suggest the strongest sector of the market is the ‘up-graders’ – buyers looking for a bigger and better home with newer features or an extra bedroom. Cornish says this market is a prime target for non-bank lenders.

“There are a lot of buyers looking at the moment to upgrade their homes to ones with more space or additional features,” Cornish says. “This sector of the market is where the non-bank industry should be focusing.”

Cornish says climate change is also driving sector activity, with many businesses on the lookout for commercial buildings with green features.

“Global warming and energy efficiency are hot on the agenda, and many business owners are looking for commercial spaces with green options,” he says. “Corporate social responsibility is playing a large role in the choices being made when it comes to office space and buyers know that there is a premium to be paid on green buildings.”

Cornish says he expects housing prices and affordability to remain relatively stable for the rest of 2007, claiming the biggest threat to the industry’s health is an interest rate rise. That possibility aside, the outlook’s not all bad.

“Property prices are looking to rise steadily, and the market is reasonably stable at this point,” says Cornish. “Another interest rate rise might upset the balance, but this would depend on when it occurs. The longer we go without a rate rise the more moderate the impact – but at this point, we expect the year to finish relatively incident free for homeowners.”

June 07: Fit or failing? The Australian property market uncovered
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