INDUSTRY MARKET WRAP FROM RP DATA

03/07/2009

The 2008-09 financial year is finally behind us and will surely go down as one of the worst (in fiscal terms) for a very long time. The S&P/ASX 200 finished 24% lower over the year and the unemployment rate has increased to 5.7% from 4.3% over the 12 months to May 2009. We have also seen consumer and business confidence remain at low levels through most of the year and the number of jobs advertised also slump.

The bright spot in the economy has certainly been the property market, over the 12 months to May 2009 Australian property values have increased by 1.6%. Keeping this in perspective, at the time of their largest falls property values declined by -3.9% from their peak meanwhile, the S&P/ASX 200 was down as much as 50.5% from its peak and as at the end of June is still 41.4% below its peak level. Australian residential property has well and truly proven to be the most resilient and least volatile asset class during the Global Financial Crisis.

Data released this week also showed that dwelling approvals had fallen 12.5% during May 2009 however, private dwelling approvals fell by just 2%. The low number of dwelling approvals continues at a time of the strongest population growth in 40 years fuelling demand for additional new housing.

Not only did dwelling approvals take a dive according to the most recent data, the HIA reported this week that sale of new homes also fell during May after increasing during the first four months of the year. During the month new home sales fell by 5.7% fuelled by a fall in detached house sales of 6.8% whilst new unit sales actually increased 6.1%.

Over the long-term the continual under supply of new housing is likely to create additional upwards pressure on property prices.