CLIFFHANGER

Election Cliffhanger

Uncertainty surrounding the outcome of the weekend’s federal election looks like having a depressing effect on share, money and real estate markets. The Australian dollar was already falling on early morning trade as Your Industry was being written.

With the coalition releasing its housing policy just one day before the election, and there being so little housing policy debate throughout the campaign, it could be some time before a degree of normalcy returns.

That, of course, depends entirely upon a smooth resolution of the current situation.

Both Labor and the Coalition are busy courting independent MPs and the Greens in order to form a Government. With The Greens likely to hold the balance of power, it may not be long before Bob Brown’s stated intention to demand a higher mining super profits tax becomes reality. Weeks before the election, sales were reported as having fallen by as much as 18 per cent in some mining towns, even after Labor’s hurried, reparative negotiations with mining companies, so property investment in Western Australia and Queensland may suffer further.

While reports of slower sales and hesitant buyers have dominated media recently, this is typical of the winter months and is likely a reflection of the wearing off of historic low interest rates as well as historic Government incentives and stimulus. You can’t have 20 per cent capital values growth in one year and no penalty in the following, on the back of a GFC and a housing market force fed on steroids. The market has to adjust and with the additional retarding effect of a federal election, any other outcome would see the bubble brigade gaining legitimacy.

While niggling uncertainty about world financial health continues, rightly or wrongly, the perception is that low unemployment, the minerals boom and China’s economic growth offset Australia’s risks. The RBA’s decision to keep rates on hold earlier this month has also helped, enabling the market to quickly adjust to real world rates being closer to 7.5 per cent.

Headlines about lower auction clearance rates don’t necessarily accurately reflect the true state of the market. The Australian Bureau of Statistics indicated that there was a 2.3 per cent rise in May loan approvals and in July first homebuyer mortgages were up from 9.5 per cent to 11.1 per cent –indicators that don’t look too shabby at all.

The combined national rise left loans up 1.9 per cent, the first such increase in eight months – a good harbinger for spring.

Valuer Herron Todd White’s August review might have had some journalists thinking agents should be running a bath and looking for a toaster. Fundamentally, it indicated fewer properties were for sale, more were being sold by private treaty and things were taking longer to sell. Once again, a quiet market is common in winter and the quieter the market and the fewer the listings, the more likely a spring surge of listings and activity becomes.

HTW indicated a slight August fall in values in the prestige Melbourne markets and the under $600,000 segment in Brisbane was thought to be driving the overall market. Perth’s median has again fallen below $500,000 but prestige sales have been so limited that it is impossible to draw a conclusion as to what’s happening there. Darwin prestige units have stabilised but houses over $1m are thinly traded. Hobart sales are slow, but no more so than normal for this time of year. Adelaide showed some minor growth in the June quarter.

In all cases it seems quality property is moving but secondary property is taking longer to find buyers – again, unsurprising in winter. Overall, there are positive indications that once the winter chill and political impasse are history, there could well be a groundswell of vendors ready to sell on the spring market. First homebuyers are likely to make a return however investors may, depending on the political landscape, be less inclined to invest in the traditionally high return mining markets.