Outside of Sydney the economic indicators are not as strong: Malcolm Gunning

GUEST OBSERVATION

Following the recent cut in interest rates, we can see that there will be a pickup in residential construction particularly in Melbourne, Sydney and to a lesser extent in Brisbane, that will feed the appetite of the property investor who makes up more than 50% of the purchase of these apartments.

We think that self-managed super funds, as well as mum and dad investors, will be heightened with the fall in interest rates. Affordable housing, lower interest rates and higher job confidence will tempt first home buyers.

The concern is that outside of Sydney the economic indicators are not as strong, which permeates into confidence.

We are of the opinion that although interest rates have been lowered, it will not push another increase in property prices above circa 4% on the back of home purchasers being mindful of the price.

From the rental point of view we expect to see vacancy rates in the major capital cities to tick up as more of the investor stock comes on the market, which means a good opportunity for tenants.

As far as the government looking to regulate property investment, we don’t think this will take place as the major economic driver is the construction boom, which the government will not wish to disrupt.

We will see a multi-tiered market with Sydney continuing to grow with strong economic conditions coupled with job security to a lesser extent in Brisbane and in Melbourne.

Concern lies with Perth where there is a declining state economy due to job losses in the mining industry and the housing marketing beginning wane.

Malcolm Gunning is the president of the REINSW and the principal of Gunning Commercial.