The fundamentals of the residential property market are still positive, and showing an increasing balance between supply and demand, according to online property classified firm REA Group.
While interest rates are expected to rise further, REA Group said the Australian property market was girded by strong bank liquidity, record-low unemployment and increased immigration, The Australian reported.
Last month, national residential listings fell 8% year over year, with Sydney listings dropping 19% and Melbourne listings falling 18%. However, REA Group said this was impacted by the timing of the Easter and Anzac Day holiday period and was not as severe as expected.
The company said that national listings are likely to be down year on year in this quarter as listings last year were very strong and partly due to the potential impact of the federal election. However, these impacts weren’t expected to be permanent, The Australian reported.
REA chief executive Owen Wilson said the March quarter was driven by a healthy property market, with listings up by 11%. The company’s financial services unit and data business also posted a strong quarter.
Wilson dismissed “doom and gloom” commentary about the residential market, saying people were buying and selling while knowing that interest rates were on the rise.
“If you look at the projected rate increases, they really only get us back to where we were pre the pandemic,” he told The Australian.
Wilson reiterated comments from major banks that the majority of borrowers were well-insulated from rate rises.
“For the last few years, banks have been using 5% interest rates for their serviceability calculations,” Wilson said.
He said that May listings had been expected to drop significantly in the lead-up to an election, but that hadn’t happened.
“If there is any impact from the election, it’s really just deferral,” he said. “Some people are predicting a hung Parliament, so that might put a damper on the market, but it’ll only be short-term.”
REA’s financial services settlements growth is likely to slow in the fourth quarter of the year as the company cycles through last year’s exceptional growth, The Australian reported. The company also expects the current trend of increased mortgage run-off rates to negatively impact the valuation of future trail commissions at the end of the year.
REA predicted that developer project starts would be down compared to last year, when the market was boosted by home builders. Rising construction costs could also throw a spanner in the works for some projects.
However, the company predicted that volume constraints in the next quarter will be more than offset by higher residential and commercial yields, The Australian reported.