Savings back en vouge
Low unemployment and falling property prices are doing little to attract home buyers to the market, with a majority of Australians now opting to save rather than spend.
In the past few months, transaction volumes in the real estate market have slipped to 20 per cent below long-term averages.
Why? It’s simple, according to RP Data’s research director, Tim Lawless.
According to Mr Lawless, Australians now prefer to save their dollars rather than spending them on property.
“Consumers are well and truly focused on saving, not spending,” he says. “Despite the low rate of unemployment and the strength of the resources sector, it is clear that the average Australian is content to pay down debt and wait for some economic security to return.”
Saving, it seems, is back en vogue for Australians.
But what impact will this have on property prices? A negative one if you look at RP Data’s latest Home Value Index.
According to the index, capital city home values have fallen each month for the past five months.
In the three months to May 2011, dwelling values in Australia’s capital cities fell 1.2 per cent, seasonally adjusted. In raw terms, dwelling values fell 1.3 per cent.
In addition, in the 12 months to the end of May, Australian capital city dwelling values fell by 2.3 per cent.
Perth and Brisbane recorded the greatest price slumps of the capital cities, with values falling 7.5 per cent and 5.9 per cent respectively.
But while the drop in Brisbane was widely anticipated, the fall in Perth prices was surprising given the state’s strong fundamentals.
“For a city that is recording rapid population growth, low unemployment and a large private capex boom, house prices have nevertheless been contracting since late 2007 after years of above-average capital growth in the pre-GFC period,” he says.
“Today, the critical piece of the puzzle seems to be buyer demand.”
But Perth is not the only capital city in this type of situation.
In each of the capitals, auction clearance rates are now 30 per cent below their 2008 averages, and listings are 25 per cent higher than in 2010.
Of course, the news isn’t all grim. While the property market remains fairly soft, data from Australian Property Monitors show the rate of decline in values has actually improved since January.
This suggests there are now more buyers in the market – buyers who are keen to capitalise on stable interest rates and falling property prices.