The surge of First Home Buyers is slowly receding as the First Home Owner Boost nears its end on 31 December 2009. Property markets seem to be on the up price and activity-wise. And everyone is cheering up. The Westpac–Melbourne Institute Index of Consumer Sentiment rose by 1.7% in October, up from 119.3 in September to 121.4 in October. That's the highest it's been since June 2007 and it keeps going up, even though the Reserve Bank raised interest rates this month for the first time since March 2008.
“What does the Index of Consumer Sentiment track?” I hear you ask. It looks at what we, the consumer, think about our household financial situation over the past year and the one to come, as well as economic conditions, buying conditions for major household items and predictions of future unemployment.
When the Index goes up that's good news for everyone because when people feel more confident they generally spend more at the shops and invest for their future. This, in turn, helps to build the robustness of our economy and keep it stable.
So is now a good time to invest in property? There have been a few doom and gloom predictions over the past year on where the property market is headed. One economist even bet it would drop by 40%, so he sold his house. That's looking like a big mistake. In general, prices are holding up because of an overall lack of housing stock and continuing population growth (among other positive factors). In fact, according to the Australian Bureau of Statistics, the last time our population grew so fast was in the 1950s and 1960s. That's how we ended up with so many baby boomers.
We're now seeing investors return to the market for the above reasons and because interest rates are still very low, rental vacancy rates overall are low and they can see the potential for long term capital gain. In fact, the ABS data from August 2009 showed a significant increase in demand for home loans by investors.
But where's the best place to buy? That will be a topic in an upcoming post.