More property purchases tipped as consumer confidence grows

New figures released by Westpac and the Australian Chamber of Commerce and Industry show that economic conditions have continued to exceed expectations during 2010. The Survey of Industrial Trends increased by 6.3 points over the March quarter to reach its highest point in more than two years.

When viewed in line with other measures of confidence (business confidence in the December quarter was at a 15 year high and consumer confidence also remains at historically high levels) I think we can safely say both the business and consumer mind set is fairly optimistic.

The strong results suggest that economic conditions are likely to further improve over the coming quarter but also provide a hint that capacity constraints may start to hinder further accelerations in growth.

Capacity constraints are already becoming apparent, with the Capacity Utilization component of the Westpac/ACCI survey showing its biggest monthly gain in more than six years.
The high levels of confidence and impending capacity shortfalls also reinforce the suggestion that unemployment in Australia has peaked and we are likely to see further downwards pressure on the unemployment rate and rising numbers of hours worked.

For the property market these are positive signs. High levels of confidence generally translate to higher levels of market activity as more consumers are willing to make such a high commitment decision as purchasing a property.

RP Data's monitoring of residential property advertisements confirms that the level of stock entering the market remains above the 12 month average whilst total stock levels are well below what was available last year.

The RP Data - Rismark Hedonic Home Value indices will be released on the 31st of March which will provide another indicator of how Australia's property market is travelling. The January Index results were surprisingly high (gain of 1.8% over the month based on a smaller than normal sample) and the February results will provide a further indication of the trend in housing values based on the such robust levels of confidence in the market.

Source: RP Data Property Pulse, 19-Mar-10

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