The drawn-out political wrangle to form the next federal government looks set to affect the nation's real estate market, delaying the start of the key spring auction season and adding further pressure on house prices.
Election officials say the country may have to wait until at least the end of next week before the final make-up of parliament is known and a new government installed. The hold up, and related uncertainty about the broader economy, will alter the timing of some auctions, with a possible flow-on impact for prices.
''The hung parliament will no doubt postpone the start of the season but we are predicting good stock levels throughout the coming months after a delay by vendors to list due to the election,'' said Real Estate Buyers Association of Australia president Byron Rose.
''The market may still be soft with demand light on so vendors may need to readjust expectations amid a high level of market uncertainty amongst home buyers,'' said Mr Rose.
Australia's real estate sector was one of the most resilient during the economic slowdown, as a rise in immigration and government subsidies to first home buyers helping to shore up demand. Big house price gains have since moderated as the Reserve Bank's six interest rate rises have raised the cost of variable mortgages, slowing price growth to 3.1 per cent in the three months to June, down from 4.2 per cent rise in the March quarter.
Clearance rates in the major cities have already begun to fall, with Melbourne's level now just below 70 per cent from more than 80 per cent earlier in the year. Sydney's auction clearances are now about 63 per cent, down from more than 70 per cent earlier in the year.
Other headwinds for the industry include falling home monthly loan volumes, lower new home sales, and drops in building approvals, which are starting to show up in house price moderation. (And the housing woes in the US keep getting worse, and some ripple effect from the latest bad news can't be ruled out.)
The median national home price fell by 0.8 per cent in June, from a 0.6 per cent increase in May, according to RP Data-Rismark figures. June's drop marked the first decline in prices in a year and a half. Despite June's retreat, the median national dwelling price still stood at $465,000 in what is considered one of the least affordable housing markets in the world.
Spring ahead
Spring is a key season for the real estate industry, with listings typically rising as much as 20 per cent from winter levels, said real estate agents.
JPP Buyer advocate Catherine Cashmore predicts an excess of stock as vendors are typically less flexible than buyers. Those selling houses usually spend weeks putting their property on the market, while demand can fluctuate more quickly to changing circumstances, such as political events and sudden interest rate movements.
''That means properties will be on the market longer than you'd expect at a spring market,'' Ms Cashmore said. She says prices could dip slightly as buyers slowly return to the market. ''I don't mean they'd go down - they would sell at the lower end of what they were asking.''
One measure of the $1 million-plus home sales auction interest, complied by buyer's advocate Mal James, shows the average number of bidders at four Melbourne council areas moving from 2.2 bidders per auction in the week of July 17 - just prior to the election being called - to as low as 1.2 bidders on August 14. On the election weekend, they were an average of 1.5 bidders.
Mr James said this weekend's buyers and sellers were likely already committed, with the expectation made weeks ago of a completed election. The real impact on the market, if any, will come in the following weeks.
''If the hung parliament's affects people's psyche then that will be proven (by stock levels) in October," he said.
Irrational response
Peter O'Malley of Sydney-based Harris Partners Real Estate Agents said there's no logical reason for buyers' faltering interest during the period of political uncertainty because the campaign and its aftermath probably won't change tax regulation or real estate market conditions.
''It's an irrational reaction but definitely the way the market reacts,'' Mr O'Malley said.
The result of the political disruption is that there will be slightly more supply compared with demand in the market once the spring selling season gets under way.
''People anticipated the election campaign would be out of the way by now,'' Mr O'Malley said. ''The end of the election campaign will coincide with increasing spring stock,'' he said.
czappone@fairfax.com.au
BusinessDay
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