Financial data from the end of 2012 shows promising signs of growth in mortgages, unemployment rates and house price increases. Information released by Fitch ratings tells us the number of people missing out on mortgage payments dropped in the third quarter as unemployment rates stayed low and borrowers took advantage of the drop in interest rates. The ratio of home loan payments more than 30 days late dropped from 1.54% to 1.36% in the three months up to September, according to data released by Fitch Ratings.
The interest rate has been cut by 1.75 percentage points to 3% since November 2011. Variable standard mortgage costs dropped to 6.65% by the end of November, their lowest levels since February 2010, according to information from the Reserve Bank of Australia. November also saw unemployment decrease from 5.4% to 5.2% compared to a month earlier.
A Fitch spokesperson said that the two interest rate cuts made in the second quarter had provided a bit more relief for borrowers even though they have not been given the full rate cut by borrowers.
November 2012 also saw a 1% fall in home prices in eight of the country’s state and capital territories compared to the year before. This month’s Australian Property Monitors report forecasts that homes n Darwin and Perth will see the biggest increases this year, by as much as 7%.
The local property market is expected to go through an increase this year as low interest rates, which we found by comparing loans at http://www.bankwest.com.au/personal/home-loans/home-loan-products, aided by the shortage in the housing market, may add another 10% onto prices. The interest rate, currently sitting at a 50 year low, has economists split 50/50 over whether the interest rate will drop to 2.75% by March 2013 according to Bloomberg. Even though the decrease in the cost of borrowing didn’t spark a major uptick in activity economists believe that further rate cuts coupled with a shortage of houses will entice borrowers back into the market.
The home price decline is showing signs it might be coming to an end, dropping 0.4% in 2012 compared to its 3.6% drop in 2011. Forecasters believe the full effects of the rate cascade have yet to be felt and will make considerable impact on the housing sector. A significant period with very little construction being completed means that housing supply will also come under more pressure and drive prices higher.
Estimates vary but the broad range that has been predicted for the house price increase is anywhere between 3.5 and 10 per cent. The major cities like Perth, Sydney and Melbourne are expected to ask prices 5 to 10% higher this year. At the end of December the average price of homes in the eight major cities was $483,000. Sydney topped the list as being the most expensive city to live in with an average property price of $580,246 while Melbourne and Perth came in at $500,000 and $479,000 respectively.
The slowdown in the growth of house prices began in 2010, by which time it had increased in every year except one in the previous 23 years. In 2008 house prices dropped by 4.1% and then climbed again in 2009 by 14%. And while there may be some hope for home owners who want to pay their mortgages off with a bit of profit, analysts do not expect the market to return to its pre-recessionary buoyance any time soon. For those who have bought properties or are paying off home loans in the major cities, an increase would mean a little more resilience in their investment and give other potential buyers a little more incentive to enter the market.