There are a number of factors pointing to the ease in the marketplace in the last few months. The positive impact of past policy stimulus - low interest rates, first home buyers grants, stamp duty exemptions and discounts are all past their peak. A few interest rate rises, another tax on property purchase and a slide in consumer confidence have all contributed as well.
A recent survey from the Housing Industry Association has shown that in May 2010, approvals for new residential dwelling fell in five out of six states, and not just by small amounts. The drops varied from a modest 1.1% in the Northern Territory, to a staggering 24.6 % in Tasmania. The major past growth and wealth creating states also had problems, with drops in NSW of 9.8 %, West Australia 13.9 %, and Queensland down 8.6%.
A recent large commercial property auction in Sydney saw 28 properties offered on the day, with only four selling. The remainder either had no bids, were passed in, withdrawn or had postponed auctions. The only sold properties were an Adults-only Toy & Book store (Darlinghurst) , a Harvey Norman (Lithgow), a warehouse (Chippendale) and a Marrickville industrial workshop. Many of the properties that failed to get activity would not have appealed to investors as they had no tenants.
Another thing to bear in mind is that the marketplace generally does slow somewhat during the cooler winter months, but sentiment in the mid and lower end of the business market is poor. Recent political events have also added to the general public’s tendency to adopt a "wait and see" attitude. Let’s remember that just a few days ago we had a different Prime Minister and the debate over the minerals resource tax was still raging.
In terms of market place recovery, don't expect it to happen overnight. Now that Gillard and crew hope to get the resources tax resolved, they will likely call an early election - say August - while they can be perceived to be on a high and that will give the market another excuse to sit tight for a month or two.
Fear not, the last quarter will improve, (can’t get worse) and all will be smiles again.