There has been so much speculation around the apartment market and how it could impact the broader housing sector, however history tell us that this hasn't been the case in the past since 2003. The data actually demonstrates that the apartment market and housing market typically move as one, a really important consideration if you believe there will be an uplift or a fall. Often there is the expectation that every cycle is different, but that is hardly the case in property. Developers build too much on the back of confidence, they stop building and the market catches up, reaches equilibrium for a short period of time and then we over build again and hence the cycle starts all over. If it didn't, then the notion of the "property clock" would cease to exist.
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Are we looking at affordability the wrong way for first home buyers? Tas from our office recently pointed out that we need to stop focusing solely on housing and maybe start looking at other forms of accommodation. Here are his thoughts.
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Again, the Reserve Bank has decided to leave the cash rate unchanged at 1.5% and again we will see the banks act on their own. Part of the reason for such a benign interest rate environment (at least for the RBA) was the recent CPI data which came in at just 0.5% or 2.1% for the year. This is only just within the RBA's desired band of 2.0%-3.0%.
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Population growth is an important driver of residential property, and unfortunately it is not being recognised as one of the major contributors to price growth in Sydney and Melbourne. When you look at the arguments around affordability, it is Melbourne and Sydney that are Australia's only real trouble spots. This correlates incredibly closely with the population dynamics being experienced in this country.
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Interest rates remain on hold at 1.50% by the RBA. What is somewhat ironic is that at the same time, there is a parliamentary inquiry into why the banks have not left interest rates on hold. RBA Governor Philip Lowe has stated that there has been an improvement to the global economy, though some uncertainties remain. He makes the case that America has passed the bottom of the interest rate cycle and that inflation has now started to rise in many advanced economies whilst the expectation of quantitative easing largely diminishes.
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If Australia was balanced on its central axis, somewhere through the middle of the Northern Territory and South Australia, it would be leaning firmly to the east as the weight of population growth continues to be attracted to the Pacific Ocean.
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