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Published on January 29th, 2013

Real estate recovery linked with retail confidence

A recovery in the residential property sector is linked to consumer confidence, which is also seeing an increase.

Senior research analyst with RP Data, Cameron Kusher, – said that should optimism grow, home sales and activity in retail may improve – however there is also a reverse correlation.

He added that current states of confidence indicate the market is poised for some progress.

He commented: "Although an improvement in consumer sentiment will be an important component to any sustainable recovery in the housing market, respondents to the monthly consumer sentiment survey already feel that now is a good time to buy a home.

"The time to buy a dwelling index was recorded at 140.0 points in January indicates most respondents feel it is a good time to buy a home."

Mr Kusher explained that this is based off a number of factors, one of which is current interest rates which have fallen by 135 basis points in two years, and property prices also seeing a drop over that same period.

He added that the combined low cost of a mortgage and a reduction in home values has seen confidence grow,but mentioned that this has not yet translated into an increase in transactions.

This can be attributed to a change in attitudes towards debt by consumers. Households are now saving ten per cent of their income over five years – this follows falls in the amount of savings that dates back to the 1970s.

Attitude is an important factor, Mr Kusher insisted, with potential home owners needing job security and assurances that their wages will increase to service their debt – in addition to paying other bills.

The RP Data expert concluded by saying that this increasing confidence will play a vital role in 2013.

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