It’s looking like a very good time to buy property with a home loan: Mark Bouris

Large measurements such as inflation, employment and balance of trade are important indicators of economic wellbeing, but economies come down to households having enough confidence to commit to property purchases.

I’ve been keeping my eyes on property markets for the last two years, wondering when we would break out of the spiral of low confidence, a withdrawal from property and the consequential flattening of property values.

In the past week we’ve seen a couple of flickers of a revival.

In the latest Australian Bureau of Statistics figures, the total value of dwelling commitments (excluding renovations) rose 0.6% in January over December.

It’s a modest shift, but it’s in the right direction.

More dramatic is the RP Data-Rismark Home Value Index, which found that five of Australia’s eight capital cities experienced house value rises in February.

The eight capital cities’ average house values rose 0.3%, following on an eight-city rise of 1.2% in January. Canberra house values rose 1.9%, Melbourne by 1.5% and Sydney had a 0.1% rise.

RP Data singled out Melbourne: because it’s Australia’s second biggest property market, it pulled up the research company’s index. It’s a good sign.

A few rises in house prices does not make me totally relaxed. We also have to find evidence of renewed consumer confidence.

This week I found such evidence with the release of the The Westpac-Melbourne Institute Index of Consumer Sentiment, which rose 2.0% in March and produced the highest confidence figure in that index for two years.

Could it be that Aussies are waking up to the fact that credit is cheap right now?

Interest rates began their drop in November 2011, so we’ve had slightly more than a year of lowering interest rates to make people rethink their financial commitments and to reassess the property market.

There’s no cause for breaking out the champagne just yet. But from my perspective, it’s looking like a very good time to buy property with a home loan.

Property has only just started its revival, meaning it’s coming off a low base in most parts of Australia and is still largely a buyer’s market. Also, interest rates are at historic lows – the cash rate was at 3.0% in those middle months of 2009, but other than that, we have the lowest cash rate since 1996.

With employment still looking strong and inflation low and stable, it’s an excellent time to buy property.

Also, the cost of funds to mortgage lenders is easing this year, so this isn’t just a good time to raise a new mortgage and buy the dream. It’s also a good environment to ask your current lender for a better deal.

There are no free lunches with property. As I tell people, you have to do your homework, buy well, borrow smart and remember that property makes its greatest sense when held for at least ten years.

Good luck.

Mark Bouris is executive chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting and tax, and insurance.