A healthy property market and a pending interest rate announcement by the RBA due this coming Tuesday has prompted RP Data’s Greg Dickason to ask the question around the RP Data teams, “Where to from here?”
Across our teams at RP Data we’re staging an important bet around where interest rates will go this year. A majority of the group agree; no change. However, some are tipping a small 0.25 per cent rise while a couple of very brave souls are even thinking interest rates might drop 0.25% – wouldn’t that be wonderful news!
So what’s the bet? It’s nothing more than what could turn out to be a very expensive lunch at the Rockpool restaurant in Sydney so as you can imagine, it’s not a bet anyone wants to lose!
Although there is disagreement amongst the troops on what might be the future for interest rates, what is interesting is no one is tipping a big move up or down. Indeed even the ASX 30 day Interbank Cash Rate Futures market is predicting very little movement until the end of the year, and then a slight rise in 2015.
As a matter of interest (pardon the pun), interest rates are at their lowest in 53 years, and indications are they will stay low. Against this backdrop, investors are very active in the market and are responsible for almost 40 per cent of housing finance commitments, a rate close to historical highs.
So as an investor, what is your next move?
Although we don’t try to predict the future, the RP Data RLI index is a leading indicator of listings activity based on platform and other search activity in our systems. It shows relative market activity for new listings going back to 2009, and currently is showing record numbers of properties being prepared for listing. At a submarket level it shows:
- For Sydney, current sales are higher than new listings, indicating a tightening of supply
- For Melbourne, current sales are lower than new listings, indicating supply might improve
- In Brisbane, a surge in activity indicates the Brisbane market is picking up in activity with supply and demand roughly equal
- In Adelaide there is a slowly improving, yet still subdued market. Sales are outpacing listings indicating a tightening of supply
- For Perth, strong but not record activity with new listings above sales, indicating some growth in supply.
From an investor’s perspective, there are some observable ‘inventory’ trends that can influence prices through the law of supply and demand. Other indicators of the market are the average time on market, and the % of discounting from first list price to sale price. Average time on market is currently at record lows, in capital cities it now takes 18 days quicker to sell a house or unit than it did this time last year.
Similar analysis, down at suburb level using RP Data’s suburb scorecard, shows the lowest time on market in the Australia for suburbs with more than 10 listings per year, is for the Perth suburb of Coolbellup at 17 days to sell and 3.3% average discounting.
So where to from here? We can’t predict the future but there are clear leading indicators that can help savvy investors with both when and where to buy.
Watch this month’s housing and economic update, presented by head of research at RP Data, Tim Lawless