"Long, slowish recovery for property": John McGrath
Australian housing prices are unlikely to rise in winter despite an increase in buyer enquiries, says McGrath Estate Agents chief executive John McGrath, who is forecasting a "long and slowish recovery" over the next three to five years.
In his latest winter market review, McGrath, notes that in March, "the country's largest mortgage broker, AFG, had its second biggest month ever in NSW since their index commenced in 2004 with $842 million in new lodgements".
"While this clearly indicates more buyers are out there, they remain very price sensitive," he writes.
"Reserve Bank interest rate cuts will no longer have the effect we're used to given the banks' reluctance to pass on the full amount. The official cash rate is now at its lowest since November 2009, when the economy was recovering from the initial impact of the GFC.
"While this might result in more sales activity in winter, it won't push prices higher because buyers are still worried about Europe and are wary of protecting themselves financially as we enter a new era of aversion to debt," he says.
Overall though, McGrath says Australia's housing markets are not in a bad state, "but people continue to wait for positive signs".
"This has been a protracted and agonising period of uncertainty. The constant flow of good and bad news both at home and overseas continues to undermine confidence.
"Once we see some positive and sustained economic change overseas, I believe our property market will begin a long and slowish recovery over a three to five year timeframe," he says.
McGrath's bearish outlook on prices is unchanged since December, when he noted a "marked improvement in buyer enthusiasm" but said that people were "looking for more good news to regain their confidence to buy and sell".
Similarly in March, McGrath said there would be no significant price "increases until the Europe is resolved and we see further signs of recovery in the US".
His observations echo those of Westpac chief economist Bill Evans following the 7.5% increase in the 'time to buy a dwelling" Westpac-Melbourne Institute consumer sentiment sub-index.
Evans said "buyers will tend to be reluctant to follow through on purchases while there are concerns about the economic outlook and job security".
This article first appeared on Property Observer.