Real estate market players are in for some heartening news. The Housing Industry Association has indicated that recovery should start in the sector by the end of the year and continue over the first few months of 2013. This estimation pertains to new housing but an overall improvement in the real estate market may also be a reasonable expectation for this period.

New South Wales will Lead Improvement

According to sources, the most improvement will be witnessed in New South Wales. An increase will also be seen in Western Australia albeit to a lesser degree. The change is not expected to be dramatic but even a mild improvement will come as a pleasant change from the continued declines in the market witnessed over the last few months. In the rest of the country, the residential building industry will be taking cues from NSW’s market activity. In the words of an HIA chief economist, if the recovery ‘doesn’t happen in NSW’ then the housing starts statistics will show a decline for the seventh time running in a period of nine years.

Recovery will Remain Constrained over the Short Term

Officials also caution that the recovery will remain subdued for now. There are several factors at work that have kept housing values, construction activity and consumer confidence in real estate at low ebb over the past months. Several of these will still apply on the market preventing a dramatic turnaround here. Household deleveraging, uncertainty about future rate interest cuts and their extent, limited credit and disproportionate taxation on housing property will all impact the recovery. In effect, while recovery will take place in the market it is bound to be a mild one until the end of the financial year 2012- 2013.

Factors that Will Support Recovery

Interest rate cuts will play a crucial part in driving housing activity over the rest of the year. The RBA’s policies will determine the degree of the housing recovery to a substantial extent. A handful of states are offering or are set to offer new home incentives which will also boost activity in this segment. However, the focus lies on policy changes expected in NSW which may make housing an attractive option for investors. If such reforms do come about, the market players will quickly re-align their strategies and move into properties here.