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Confidence Strengthens In Australian Property Market

Fuseworks Media
Fuseworks Media

Melbourne, 14th September 2010 - Australians have strong property purchasing intentions, despite rising interest rates, according to independent market analyst Datamonitor. The latest Datamonitor report reveals that 8% of Australians intend to purchase an investment property in the next 12 months, while 7% plan to purchase their first home. "Consumer confidence in the Australian property market has rebounded after the tremulous last year" says Petter Ingemarsson, Datamonitor's financial services analyst. Despite record-low housing affordability due to steadily rising property prices and interest rates, first home buyer intentions reached surprising strengths in the recent Datamonitor survey. Indeed, 7% of respondents currently intend to buy their first home in the next 12 months, up from 6% in 2009. This is particularly surprising given that most forecasts expect first-time buyer demand to be relatively muted this year. "The strong first-time buyer demand in the survey is largely driven by confidence in property prices" comments Petter Ingemarsson. "The residential property market weathered the storm of the financial crisis without a major price correction, contributing to the current strong consumer confidence." In a 2009 Datamonitor survey, 58% of consumers regarded falling property prices as very or quite likely, a proportion which dropped to 20% in the 2010 survey. Investment property intentions have also reached a high, with 8% of consumers indicating that they intend to purchase an investment property in the next 12 months. This is an increase from 5% of respondents in 2009. Potential property investors fail to be deterred by the prospect of increasing interest rates. Only 2% of respondents regard falling interest rates over the next 12 months as very likely. "The prospect of capital gains drives property investor intentions, with rent income a secondary consideration" says Petter Ingemarsson. Given the forecasted increases in interest rates, it might be expected that more mortgagors are looking to fix their rate. However, over the last year fixed rate mortgages have remained unpopular. In the first half of 2010, less than 3% of lending commitments to owner-occupiers were fixed. Relatively unattractive pricing of these loans, combined with a lack of marketing by financial institutions, has contributed to this development. However, the low proportion of owner-occupiers opting for a fixed loan can also partly be attributed to poor previous experiences with fixed rate loans. "When rates were near their high point in March 2008, 25% of lending commitments to owner-occupiers were fixed", concludes Ingemarsson. "These mortgagors fixed their rates at the worst of times and may thus be wary to opt for a fixed rate mortgage in the future."

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