Rate cuts pique housing interest

Consecutive interest rate cuts triggered a 25 per cent surge in online property searches.

Realestate.com.au chief economist Nerida Conisbee.

Consecutive interest rate cuts triggered a 25 per cent surge in online property searches, helping to offset a slump in inquiries from prospective China-based buyers amid the trade row with the US and as more defects emerged in Australian buildings.

The property market outlook, discussed by realestate.com.au chief economist Nerida Conisbee and property analyst Martin North in the second episode of The Australian’s On the Fence podcast, also sees Perth lagging behind other cities due to a post-mining boom income decline.

Ms Conisbee said that ­realestate.com.au, owned by REA Group, which is majority owned by News Corp Australia, had seen a 25 per cent jump in search activity from buyers in the 12 months to August.

“We can see from search activity that interest rate cuts are very popular with buyers. And the correlation between a cut and searches is high,” she said. “It does give us a good indication that’s (interest rate cuts) now flowing through to clearance rates. We can see clearance rates are well up … and very low volumes.

“On the one hand, we can see that buyers are back. But on the other hand we haven’t really seen any impetus for people to sell.”

Ms Conisbee said alternative investment options to the property market, including the sharemarket, were “yielding very, very low returns”, meaning real estate prices have started to “creep up”.

She also stressed the negative impact publicised defects and flammable cladding were having on Chinese buyers, and warned if the China-US trade war continued, it could “derail a recovery” in the Australian property market.

“Investor activity is very, very low.” Ms Conisbee said. “Chinese search is down 50 per cent from 12 months ago. You know they were big buyers particularly of off-the-plan, and then in Sydney we’ve got those issues with cracking towers (and in) Melbourne we’ve got flammable cladding. There’s lots of issues in the development industry that will take a long time to unfold.

“Things are recovering but I don’t think we can be looking forward to 10 per cent-plus price growth in Sydney in Melbourne any time soon.”

Mr North said that in Perth and other parts of Western Australia, up to 3 per cent of households were in default, with many more suffering mortgage stress in the post-mining boom era. “There are more than a million households struggling with money … These ratios are very concerning,” he said.

Ms Conisbee said mortgage stress in Perth was hitting suburbs where often young people “bought at a peak”.

“They’ve had a huge drop in income as well. And then at the same time, you’ve got new homes being built down the road cheaper than they bought. So they’re going into a situation where their homes are losing value. They’ve lost income. It’s a very distressing situation,” she said.