Waiting, waiting

Mortgage Choice chief executive Michael Russell has had a pretty tough year. Sagging house prices and lower demand for home loans do not make for a happy mortgage broker.

Despite this, Mortgage Choice has done okay, and is growing its market share in the weak market. But yesterday, Russell was looking ahead at where the property market might go.

Predicting price movements is tough, but Russell had an interesting piece of intelligence from within his business: The number of first home buyers and property investors with pre-approval for loans is higher than it has ever been.

The stats suggest there are a large number of punters sitting on the sidelines with cash ready to go. The question that Russell has is: What will get them in the market and buying?

Russell’s sense is that most are waiting for an improvement in affordability. Most likely, that means further reductions in prices, but Russell’s feeling is that a further reduction in interest rates could be the spark needed to turn those pre-approvals into actual loans.

There is more than a touch of concern that is might take things to get worse before they get better. That is, it may only be when we see further falls in house prices and the RBA stepping in to support the economy with rate cuts that the housing market gains some momentum.

Leaving this aside, I wonder if the pent up demand in the housing market might be a symbol of wider demand across the economy.

CPA Australia yesterday released an interesting SME confidence survey which showed that Australian businesses are expecting a slightly lower level of growth for their business in the coming years.

However, there are a few bright spots in the survey.

For example, 45% of responders said they will either definitely or possibly need funds in the next 12 months, with business growth cited as the main reason for the new capital.

Like the pre-approvals data, that suggests there is at least a degree of pent-up demand out there. Businesses clearly want to get their growth plans on track, but they are waiting, waiting, waiting.

Waiting for conditions to pick up in their sector.

Waiting for consumers to start spending again.

Waiting for the smoke to clear over the global economy.

Just like Michael Russell, we are waiting to see what the trigger is to end the waiting. He may well be right – perhaps it is that next interest rate cut that will give us the kick-start we need.

Will it come next week, as a special Christmas gift for the business community? Let’s hope so.

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