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Rental Squeeze? Love it!

Rental Squeeze? Love it!

Despite belief that housing costs will rise in 2008, Australians remain very confident in the property market and general economy.This is on the back of a rising East Coast market and fresh new Federal Government, which all goes well for a very profitable year ahead in the Australian Property Markets.

Consumer sentiment regarding next year's economy is overwhelmingly positive with the rental squeeze benefiting a significant number, according to the annual consumer sentiment survey conducted by mortgage broker Mortgage Choice.

The independent online survey completed in early November by 1,002 Australians, 90 per cent of whom were property owners, found 83 per cent were confident that the country's economy will be strong during 2008.

Sentiment has increased from last year's 69 per cent, despite the global credit crunch, rising food and petrol prices and housing affordability problems.

Mortgage Choice National Manager Corporate Affairs, Warren O'Rourke said the outcomes of the nationwide survey provide an interesting insight into the general public's expectations of and plans for the short-term future, especially in terms of property investment.

"There has been a significant uplift in Australians' perception of the country's financial situation", Mr O'Rourke said.

"Sentiment increased by 14 percentage points and while interest rates and economic management at federal level are the top two concerns, followed by petrol prices, consumers continue to have a positive outlook on property and their finances."

"With housing loan approvals still very healthy, though at a more reasonable pace, the results indicate this trend should continue with almost half the respondents - 44% - planning to invest in property in the next 12 months.

"This compared to 35 per cent last year", he added.

Victorians were the most likely to invest in 2008 (47 per cent) and Tasmanians were the least likely (36 per cent).

Interest rate concern is almost certainly on the increase, with 45 per cent of respondents saying that was their biggest concern for 2008. 47 per cent said the same in last year's survey but `economic management at a government level' was added as an answer this year and was the second biggest concern at 25 per cent.

Petrol prices came in third at 14 per cent (ranked second previously), followed by job security (6 per cent) and fall in housing prices (4 per cent).

Further on rates, 92 per cent of respondents believed they will rise in the first quarter of 2008.

Will they be able to afford it? Of those with a mortgage, only 21 per cent could not afford any increase at all.  Surprisingly, 28 per cent were confident they could afford an increase of 1.0 per cent.

There was an upside to the current housing market situation when it came to the effect of the widely-publicised `rental squeeze' on property prices.

While 21 per cent said prices are rising quicker and it was affecting them in a negative way (i.e. increased rent), 16 per cent said the price rises were affecting them in a positive way (i.e. increased rental income). 55 per cent said prices were rising but it wasn't affecting them at all.

State-wise, Tasmanians were least likely to see rental squeeze affecting property prices (86 per cent) and Queenslanders were the most likely (94 per cent).

Unsurprisingly, the majority of respondents (54 per cent) said housing prices will increase over the next 12 months, comparing to 34 per cent last year.

Queenslanders led the pack in this sentiment at 67 per cent and Tasmanians were at the other end of the spectrum. West Australians were the most likely to believe housing prices would decrease.

Of those respondents who are planning to invest in property in 2008, 89 per cent are already making sacrifices in order to do so. This was quite an increase from last year's 75 per cent.

The most common sacrifices were the same for all age groups i.e. 18-54 year olds: cut back on spending (26 per cent), purchase a less expensive property than desired (10 per cent) or miss out on an overseas trip (9 per cent). 

Some (5 per cent) were prepared to take on an additional job (5 per cent) while 3 per cent were moving back in with parents to save on rent.

While a lot of the respondents (45 per cent) indicated they will renovate an existing property as an alternative to purchasing a new one in 2008, this means that 55 per cent of those who already own property are planning to purchase again in 2008.

All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services provided by SMATS Services (Australia) Pty Ltd or Australasian Taxation Services Pty Ltd.

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