Australia has had a boom and gloom economy over the past year. On the one hand our economy still grew – unlike many others around the world – underpinned by a resources boom. But on the other hand, consumers and businesses were gloomy.
And it was much the same with property. Some areas fared well through the year, but many didn’t.
However, looking back, 2012 will be remembered as the year the property market turned.
It didn’t crash like many property pessimists predicted. Sure it stalled in some areas, dropped a little in others and prices fell significantly in a few spots, but in the middle of the year things slowly started to change.
So what gives?
Our property markets started the year in a tug-of-war caught between falling interest rates on the one hand and market uncertainty on the other.
There were concerns of a meltdown in Europe that could bring the financial system to its knees as well as worries about the US economy. The European economy is still a “basket case” and will remain so for years, however the major risks to the financial system seem to have been averted and over the year the USA economy has improved, albeit slowly.
However we have something new to worry about – the health of our resources boom has come into question. The Chinese economy, the powerhouse behind our resources boom, slowed down during the year, and falling commodity prices and high costs of production have brought concerns about the future of many of Australia’s major mining projects.
What happened in our property market?
We started the year with more properties on the market than there were buyers as many potential home owners and investors stood on the sidelines, too nervous to make a decision waiting for the market to bottom.
Of course it’s not really as simple as that, because there is not one property market.
Well-priced properties in prime locations and with an element of scarcity in the middle price range (say $450,000 and $850,000) have still been selling well, even though clearly there was less interest from both owner-occupiers and investors than before.
However, “B”- and “C”-class properties have not been not selling well. Nor have expensive properties in our more affluent suburbs or holiday properties. Some dropped in value by up to 10%, and some couldn’t be given away.
Well, it wasn’t really as bad as that, unless you were in some remote regional location, but you’d have to give a very steep discount for someone to buy them.
Then things changed
Eventually a combination of increasing affordability due to higher wages, lower prices and falling interest rates brought buyers back into the market, heralding an upwards trend in values from around the end of May.
How did things finish off?
The latest figures from RP Data up till the end of November show that capital city home values remain 5.6% lower than their historic highs of November 15, 2010, but up 2% from their low of late May 2012.