Slower pace but strong potential for 2004 property market

5 January 2004

The extraordinary success of the property market was a key feature of Australia’s strong economy in 2003.  On current indications, 2004 will also see a buoyant property marketplace, albeit at a more restrained pace as market forces and rising interest rates slow the rate of growth.

"There is no doubt that the property market was a seller’s market in 2003," says Real Estate Institute of Australia (REIA) President Kareena Ballard.

"Natural market forces combined with the effects of the Reserve Bank’s decision to raise interest rates at the end of 2003 will result in slower overall growth in 2004, but we still anticipate strong performance across the market."

The REIA’s annual round-up of the property market, Australian Property Market Indicators (APMI), released today, provides a summary and analysis of the trends established in the property market during June 2002 – June 2003, as well as a comprehensive collection of all leading property market indicators in Australia for the past five years.

"Property is a key sector of the Australian economy," says Mrs Ballard.  Dwelling sales have expanded from $90 billion on 13 per cent of GDP in 1999 to $156 billion or 21 per cent of GDP in 2003.

Comparatively however there was substantially less first home buyer participation in the market place in 2003, with only 13.6 per cent of all financed home buyers purchasing their first home by June 2003, compared with annual averages in the range of 20 to 25 per cent in the last ten years.

"‘The REIA is concerned that further interest rate rises will further erode home loan affordability which is now at its lowest point since September 1995," says Mrs Ballard.

In its overview of the commercial property market, APMI reports that commercial property transactions were valued at $21 billion in 2003, with the retail sector outstripping the office sector as the dominant investment preference for commercial property investors for the first time.

High levels of business and consumer confidence generated enormous interest in the property market during 2003.  Strong economic fundamentals have influenced the recent high levels of investment in property and the generation of wealth through property purchases and construction.  Looking ahead, the REIA believes that while these fundamentals remain in place, 2004 will offer strong potential in the property market, although at a slower pace than that set during 2002 and 2003.