Author: Enzo Raimondo

Healthy real estate activity points to an economy in recovery.

The Reserve Bank of Australia’s decision to leave rates on hold for the second month in a row is a clear signal of returning confidence in the economy. This confidence has been reflected in the housing market as well as other sectors, such as construction and retail.

Throughout 2009 the housing market had remained resilient, with first-home buyers being particularly active by taking advantage of Government assistance through grants and historically low interest rates.

This was evident a few weeks ago, when, before the announcement of the continuation of a number of the grants, the number of homes sold at auction with a sale price of below $500,000 was between 54 per cent and 61 per cent of the market.

While first-home buyers have been active, there has also been a lot of activity in the auction market, a segment that generally attracts only a limited number of first-home buyers. Clearance rates have been ranging from the mid 70 per cents to the mid 80 per cents for weeks and reflect the demand for well-presented property, particularly in the mid-tier price range. The recent clearance rates are well up on the 50 per cent to 60 per cent in 2008.

Real Estate Institute of Victoria analysis of the markets suggests activity will remain buoyant for many months, with an increase in demand and supply likely to occur in spring.

The greatest factor affecting the housing market continues to be employment levels. The unemployment rate remains below 6 per cent, however, a sudden rise in unemployment will harm rising confidence levels and could impact the housing market.