Mr
McLeod of Rapid Realty Australia and Director of McINC Investments and
Consultancy said, “Consumer confidence indices have been improving over many months
which suggests that lower prices and retail discounting is stirring the end
consumer to feel they have more bang for buck. “This sentiment has been evolving
in the non-discretionary spending sector such as accommodation and housing for
many months”, Mr McLeod said.
“Leaders
in our North Queensland headquarters in Townsville have reported that
prospective tenants and buyers for that matter are asking to negotiate prices
down more frequently and with more depth suggesting consumers have a higher
expectation that prices could be discounted”, Mr McLeod said.
This
is also reflected in the Melbourne Institute’s Consumer Sentiment Index which
reports that sentiment has increased by 2.0% over the month to 110.5 points
which is its highest level since December 2010 (111.0 points). The consumer
sentiment index has increased over six of the past seven months and is up by
12.6% over the past six months.
Each
component of the index except for time to buy a major household item rose over
the month and only the index which measures family finances over the past 12
months is showing higher levels of pessimism than optimism. RP Data Property Pulse, 15/03/2013.
For
the first time in nearly a decade, the Townsville rental vacancy rate has
bounced over 3% to 3.14% in February 2013, HTW
Rental Vacancy Survey, Feb 2013.
For
many in the industry this is unprecedented and could typically put downward
pressure on rental accommodation prices if sustained. However, Mr McLeod
believes this anomaly will be short lived and should improve for investors as North
Queensland, and Townsville particularly, traditionally has a seasonal movement
of consumers out of accommodation in November and December and January.
Accommodation is now being filled with new arrivals and streetscape changes occurring.
By
contrast, the Australian Bureau of Statistics (ABS) released the January 2012
housing finance data this week. The data revealed that the number of owner
occupier finance commitments fell by -1.5% over the month with non-refinance
commitments falling by -1.9% and refinance commitments -0.7% lower.
Year-on-year, non-refinance commitments are -0.8% lower than last January while
refinance commitments have recorded a much greater -10.0% fall.
The
total value of housing finance commitments rose by 2.4% over the month with
investment finance commitments increasing by 4.4% and owner occupier
commitments increasing by 1.3%. Year-on-year, the total value of owner occupier
finance commitments has fallen by -0.5% however, investment commitments have
seen a significant increase of 18.6% as reported by the ABS. The increase in
investor finance compared to domestic finance is a significant measure of consumer-centric
investors’ finding confidence in a more favorable property market, improving
global economic data from the United States, Asia and Europe on our domestic
equities markets expanding.
The
Melbourne Institute Consumer Sentiment Survey identified 21.3% of respondents
felt that real estate was the wisest place, down from 24.0% last quarter to
invest over bank deposits, shares, paying down debt, etc. The proportion of
loans to first home buyers was at its lowest ever level in Queensland (10.4%)
over the month.
“The
gestation period for consumer-centric investors as confident buyers has been
long coming over the past four years since the housing market peeked, and with
a cultural effect from consumers becoming comfortable with retail price discounting,
now is the time to “wake up and smell the roses” before the Self-Managed Superannuation
Fund and experienced and astute investors pick the early blossom in the
Townsville real estate market”, Mr McLeod said.
So
when could be the best time to pick the right property?
At
a micro level it is impossible to pick the perfect day. The lead indicators are
in place to act within the next 6-12 months because the number of competitive buyers
with consumer-centric needs (owner-occupiers) should be in less demand.
Although not the only lead indicator of owner-occupier buying behaviors, the higher
rental vacancies rate over 3% in December 2012 suggests a historical correlation
of lower domestic demand by owner-occupier’s could be occurring in the next
6-12 months.
We
did see a contrasting behavior by owner-occupiers later in 2012 as Townsville
welcomed the 3rd Army Battalion approximately 6-12 months before as rental
consumers. Demand indicators showed lower rental vacancy rate at around 2%
during March and April 2012.
A
sustained improvement in investor and business confidence could play out in the
Townsville economy after the Federal election is held in September 2013, by
which time State Government infrastructure spending, institutional, SMSF,
private equity and development investor’s may also ramp up the flow of capital
on the back of lower domestic interest rates and a global financial recovery.
In
the meantime, a residual demand of owner-occupiers seeking to upgrade,
downgrade and street change, and those economically resilient consumers with
residual wealth and a growing institutional investor market should see property
prices be maintained over coming months in the Townsville residential market.
Data
Source:
Rapid
Realty Townsville Vacant Rates Data, Feb 2013. www.rapidrealty.com.au
Australian
Bureau of StatisticsWestpac and Melbourne institute Consumer Sentiment Survey
RP Date Property Pulse, February 2013
Herron Todd White Townsville Rental Vacancy Rate Survey, Feb 2013