Australian residential market could be on road to recovery: CBRE

The Australian residential market could be on the road to recovery with pre-conditions now existing for the market to grow, according to CBRE.

The Australian Residential MarketView report  for the December 2012 quarter shows an improvement in sales volumes but suggests previous significant growth cycles are unlikely to be seen in the immediate future.

“A low interest rate environment, modest improvement in building approvals, an increase in population growth, improving rental yields, expanding buyer enquiry levels, sales volumes improving and recent equity market growth are all necessary for a market geared towards recovery,” says CBRE’s regional director of residential valuations Tom Edwards.

Edwards says households will remain focused on debt reduction rather than expanding property holdings, which will deliver a stronger capital growth.

Melbourne remains the star performer in terms of auctions, with a surge in auction listings and a strong clearance rate of 70% over late February.

The clearance rate during the same period in 2012 was around 50%.

However, the report says a recovery in price growth is not evident as buyers remain well informed about realizing pricing levels and are cautious about taking on high levels of debt.

Buyer activity within South East Queensland is improving and the South East Queensland Coastal market is stabilising after a period of very low buyer activity.

“Despite this improvement, indications of capital growth remain largely absent,” says Sam Reilly from CBRE’s global research and consulting team.

Reilly says the lower price brackets in South East Queensland markets are reporting better levels of buyer enquiry and increased levels of stock shortages as demand improves.

In Sydney, the vacancy rate is well below the equilibrium of 3% at 1.9%.

The report says building activity within Sydney is gradually improving however sales volumes are flat as buyers are reluctant to purchase in upper and prestige brackets.

However, Sydney’s Inner West is rebounding, with properties up to $1.2 million subject to a high degree of buying activity.

“Current residential building activity in Sydney is gradually increasing from the subdued conditions experienced during and after the GFC,” says Reilly.

“This is partly in response to stable economic conditions but also as a result of supply shortage that was difficult to rectify due to a challenging planning regime and problems associated with obtaining credit.”

In the west, Perth remains positive with strong economic growth and residential sales improving.

The report says rental growth and levels of investor demand are improving due to low interest rates and stable levels of buyer confidence.

Perth’s vacancy rate remains tight with Edwards saying this is a strong contrast to most other residential markets across Australia, where employment outlooks are subdued.

Adelaide continues to have low levels of buyer confidence as the state has a subdued economic growth outlook.

The report says the current growth level is sitting well below the national average.

Canberra’s entry-level apartments are the star performers of its residential market and the report notes the federal election has had no effect on buyer activity.