by Christian Edwards
SYDNEY, Sept. 16 (Xinhua) -- Summer may have come early for the furious Australian property market this week, with bullish insiders flagging double-digit growth on the back of the central bank's (RBA) record low rates and the growing competition here, driven by international investors.
John McGrath, founder of market leading McGrath Property, said that while the stars are aligning for investors, the numbers coming out of Sydney's red-hot market should make everybody sit up and take notice.
"The Chinese market is extremely strong, the strongest I've seen a new entrant into the market, " McGrath observed.
The Sydney property legend said that Australia's record low interest rates and the capacity to fix rates for a long period of time is proving highly attractive.
The latest House Price Index (HPI) released by the Australian Bureau of Statistics (ABS) has shown a rise of 2.4 percent for the June quarter and 5.1 percent for the year.
Richard Grainger, a Director with the boutique property platform Sunrise Property Group (SPG) told Xinhua that it was an exciting time for specializing in sourcing Australian property for Chinese investors. However Grainger said that caution was still paramount during such periods of opportunity.
"We embrace the excitement, yes, but we also urge caution. In fact, we reject many of our partners' proposals because the instinct to go in for the kill when the market presents like this is sometimes overwhelming. The sun might be shining on Australian property, but it is the bright day that brings forth the adder - as Shakespeare says and that craves wary walking."
And the Reserve Bank of Australia's (RBA) rate cut last month of 25 basis points to a historical low of 2.5 percent will be tempting music to the ears of home owners and investors, but not so good for local first homebuyers as prices continue to rise.
Perth has recorded the highest capital growth of the major Australian cities. The year-on-year rate of 11 percent growth has been bolstered by record low interest rates and low vacancy rates below 1 percent leading to increased competition between first homebuyers and investors.
"Demand is outstripping supply and that is pushing up prices," says Joe Passione, CEO of Weston Property Group based in Perth.
"We have seen a marked increase in sales in house and land packages over the last 12 months, and that is because the spike in rents have started to approach parity with purchase prices. House prices are going up but so are rents."
The ABS figures are the latest in a series of positive reports released on the Western Australian economy. The July Commsec State of the States report once again maintains Western Australia (WA) ahead of the rest of Australia's state economies followed closely by the ACT(Australian Capital Territory). Despite fears of a mining boom slow down, the robust WA continues to perform with strong retail and housing construction figures.
CommSec chief economist Craig James said although the figures only represented prices for houses, not apartments, they came in line with other data showing a recovery in the property market.
But supply was yet to catch up with demand, he said.
"There's strong demand for homes, underpinned by lower interest rates, but we still haven't seen supply catch up to the demand," James said.
"There is always a bit of a lag effect -- the higher home prices serve as an attraction to investors to move into the market, more freestanding houses and apartments get built, they eventually respond but it can take 12 months for new homes to be built.
"Over the next 12 to 18 months we would expect to see housing leading the way and driving the economy, taking the baton from the mining sector," he said.