• Reserve Bank Australia decided to leave the interest rate on hold for a 2nd consecutive month
  • Almost certain for further interest cuts, not once but possibly twice before March 2020. If happens, will make the cash rate of historic low of 0.5% and home loan rates from many lenders below 3%
  • RBA’s economic forecasts continues being less optimistic since 2019
  • In August 2019 forecasts, RBA expects
    • the economy with slow growth,
    • unemployment rate at 5.25% instead of 5% in May’s forecasts, though hoping down to 4.5%,
    • the inflation rate for 2020 now downgraded to 1.75% instead of previous forecast of 2%
A downturn in building construction industry in happening
  • Construction work done is underway
  • Building approvals in the down track
  • The high-level drop-off in residential sector is out of RBA’s expectation and will be closely monitored by RBA
Construction Work Done Jun 2000 to Jun 2019
Notes: Construction work down is the value of construction work done each quarter, chain volume measure.  Sources: ABS 8755.0
  • Construction work done has dropped by 7% in last 12 months
  • The drop was mainly contributed by constructions in apartment sector, which caused by
    • less activities of investors both locally and internationally
    • stricter lending criteria on investor lending and lending for apartment purchases
    • additional taxes on foreign purchasers
Building Approvals Jan 2013 to Jul 2019
Building approvals are a 12 month rolling sum of non-seasonally adjusted data. Sources: ABS 8731.0
  • Building approvals have been experiencing substantial falls, about 24% off from 12 months ago. Major falls in NSW, VIC and QLD.
  • The falling on building approvals will continue with no signs of stop or easing, leading more job losses in the construction sector
Sydney and Melbourne house markets rebounding but faster than RBA’s expectation
  • There is no doubt that Sydney and Melbourne property markets are turning around. So does Brisbane and Canberra but with a bit lagging in pace. Perth market continues falling
  • Robust auction clearance and private sales provide strong support
  • Buyer inquiries are much higher than the time before Federal Election in May
  • However RBA did not expect such bigger than expected rebounds, with worries on financial system risks and higher household debt
  • Given the soft Australian economic conditions and expectations, modest growth in property market is still likely to happen in next couple of years.

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