Posted on Wednesday, September 10th, 2014 in by Matt Garmony
The Reserve Bank of Australia (RBA) Board decided to leave the cash rate unchanged at 2.5% at the 2 September 2014 meeting. In a statement released by RBA Governor, Glen Stevens, he indicated “growth in the global economy is continuing at a moderate pace . . .with weakening property markets a challenge in the near term . . . and commodity prices important to Australia have declined this year.” He went on to say “resource sector investment spending is starting to decline significantly” as well as “public spending is scheduled to be subdued.” In relation to unemployment, the RBA stated “the banks assessment remains that the labour market has a degree of spare capacity and that it will probably be some time yet before unemployment declines consistently” after increasing recently to 6.4% in July from 6% in June 2014.
This uncertainty appears to be affecting the broader Australian economy with a report by the Federal Chamber of Automotive Industries indicating that “Western Australian new vehicle sales are down 10.2% for the month of August as well as being down 8.3% for the year to date.” A report by property research analyst RP Data indicated “demand for residential real estate in Perth is moderating, with the second set of figures released in a week suggesting price growth could have peaked for the time being.” The valuers at Garmony Property Consultants concur with the statements by RP Data and agree that the residential property market appears to have peaked with subdued market conditions currently occurring and reports from real estate agents indicating that the properties are taking longer to sell with fewer buyers in the market.
Furthermore, with the current number of apartment buildings currently under construction, as well as large towers proposed in inner suburban localities, we may see an oversupply of residential apartments in late 2014 early 2015 and may expect similar conditions to the 2007/2008 period where there was an oversupply of residential apartment units in the Perth metropolitan area causing apartment property values to decline.
Uncertainly in the commercial property market continues with office rentals declining as a result of reduced resource sector investment. In addition to the declining commercial rental market, the retail sector is experiencing subdued conditions with rental incentives and market rental adjustments by landlords to existing and prospective tenants occurring in order to avoid extended vacancy periods.
We recommend potential purchasers and or tenants seek independent advice from one of the valuers at Garmony Property Consultants before making any important property related decisions.