What your finance advisor wants you to know about the budget and its possible effect on the Perth real estate market.
According to the Index of Consumer Sentiment published by the Westpac Melbourne Institute, consumer confidence in Australia dropped this September after the Index had stabilised the past months. This news has eroded the hope for steady recovery.
The Index, which uses 100% as a baseline in which consumers are neither optimistic nor pessimistic, fell from 98.5 to 94 from August to September. Another bank, ANZ, conducted the ANZ-Roy Morgan poll and saw a drop from 115 to 113.3 during the same time period. Experts believe that the negative sentiment or concern about budget and the economy are the main reasons why consumer confidence dropped.
What Effect will it Have on Your Property?
While there aren’t a lot of intrinsic factors in the budget that indicate the property market could begin to dip, the market traditionally responds more to extrinsic factors such as the emotions of consumers. Since the property market is driven much more by the consumer than by business, consumer confidence may be the key factor in determining which way the market will go.
In other words, someone who is worried about their financial situation, both present and future, isn’t going to go out and buy a larger home or a new home. If consumer confidence continues to dip, we could see lower demand for housing due to less people wanting to buy. This could in turn produce a large supply.
Subsequently, auction clearance rates could decline as less property sells, stagnating the market. This eventually results in less loans and less construction permits, affecting the labour market.
What You Can Do
We don’t see property as a great short term investment but it is the most reliable long term investment. Consequently, you may want to wait and see if prices go down. Call (08) 9453 8888 to learn more.