The bounce back in the Australian economy forecast in the Mid-Year Economic and Fiscal Outlook (MYFEO) is positive for the property market, the new president of the Real Estate Institute of Australia said.
Hayden Groves, who was elected president of REIA just last week, said the economic boost should give buyers and sellers the confidence to move forward with their property journey.
The MYFEO revealed the real GDP is expected to grow 4.5 per cent in both 2021 and 2022, while the unemployment rate is tipped to fall to 4.25 per cent in the June quarter of 2023.
Wages are also forecast to climb by 11.25 per cent this financial year and 2024-25, and outstrip inflation, which is expected to rise by 10.25 per cent.
“The uplift in expected economic growth from 1.5 per cent in 2020-21 to 3.75 per cent in 2021-22 is a major boost to the economy,” Mr Groves said.
“Together with a drop in the unemployment rate to 4.5 per cent and 4.25 per cent in the following year, wages growth of 2.25 per cent and 2.75 per cent in those two years and then accelerating along with a CPI within the RBA’s target will be a positive for the property sector.”
Federal Treasurer Josh Frydenberg said the rapid recovery from the Delta-imposed lockdowns is expected to see the addition of around one million jobs between October 2021 and the end of the forecast period, which is about 150,000 more jobs than first forecast in the 2021-22 Budget.
“The underlying cash balance in 2021-22 is expected to be a deficit of $99.2 billion (4.5 per cent of GDP), a $7.4 billion improvement since the 2021-22 Budget,” he said.
“And $2.3 billion stronger across the forwards.”
The Property Council of Australia also welcomed the treasurer’s economic outlook and forecasts.
“The MYEFO shows Australia’s economy is on track for a strong recovery, underpinned by a strong property industry, which employs more people than any other sector,” the council said in a statement.
“The property industry is set and ready to drive this rebound in employment and economic activity.”
The council said it was particularly pleased with the plan for boosting migration.
“The Property Council also welcomes the Federal Government’s plan to bring back normal levels of net overseas migration a year earlier than previously forecast and then run at ‘catch up levels’ for two years from there,” the council said.
“This will be a vital ingredient in supporting economic recovery and addressing crucial skills gaps.”
Some schools of thought have questions whether rising migration will stymie wage growth, but Mr Frydenberg argues the two can rise simultaneously.
“I don’t see it as a binary choice between having a sensible, measured immigration program… as well as getting a tighter labour market and putting the policies in place that drive real wages up,” he told ABC News.
Mr Groves said 2022 was shaping up as another good year for the Australian property market.
“The outlook for interest rates is benign under this scenario, and with signs that prices are stabilising, buyers and sellers should have confidence in the economy and the property sector,” he said.
“With the evidence new listing inquiries are increasing, the number of properties coming to market early next year should approach long-term average levels, which in turn, ought to moderate price rises, easing affordability decline experienced in 2021.
“With the possibility of tax cuts next year increasing disposable incomes, affordability would get a boost.
“Whilst all the signs are positive for the property sector a long-term plan addressing the supply side is still needed.”
