production as a nation and, on
a per-capita basis, it's a useful
indicator of our standard of
living. A growing GDP creates
a flow-on effect to property
because people will generally
look to improve their standard
of living as their incomes grow.
lacking confidence. Check out
the monthly Westpac-Melbourne
Institute Consumer Index to get
a snapshot of market mood (the
equilibrium is 100). Business
confidence is equally important.
When businesses are suffering, they
stop hiring, reduce costs and even
reduce prices, thereby resulting
in lesser profits. They focus on
the bottom line rather than
further investment or expansion.
When business contracts so does
the broader economy, affecting
job stability and incomes.
of living. The Reserve Bank has
atargetof23%andfactorsany
movements either side of this into
its monthly decision on interest
rates. When inflation and cost-of-
living pressures are high, people
batten down the hatches and put
off all kinds of spending decisions,
choosing to save instead. Real
estate takes a direct hit without
buyers, properties don't sell!
will disturb the market more than
high or rising unemployment.
Without jobs, people can't pay
their rents or mortgages, and this
can result in increased mortgagee
sales and falling prices.
more than falling interest rates.
This is because mortgages tend
to be the biggest expense of a
household, so when rates go
down, households can save
significant dollars or buy more
property with cheaper finance.
usually makes people want to
upgrade their lifestyles with a
bigger house or a move to a better
location. There are three main
ways to increase wealth get a pay
rise, save or invest. Following the
global financial crisis, saving was
the preferred avenue to wealth and
debt reduction was the primary aim
of most households. By the end of
2012,weweresavingabout10%
of our incomes and our average
loan-to-valueratiowasjust50%.
Now people are starting to invest
again, with almost one in two new
loans in New South Wales going
toinvestorsatthestartof2013.
do a health check on the Australian
property market, at any given
time, then these are the economic
indicators to watch.