- PROPERTY MARKET WRAP 23rd July 2010 - SPECIALISED PROPERTY GROUP
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Industry Market Wrap
The Housing Industry Association (HIA) in conjunction with RP Data released the Residential Land Report for the March 2010 quarter this week. The report findings show that nationally the volume of residential land sales has eased, down 40% compared to the first quarter in 2009. Adelaide is the only capital city market which has recorded an increase in the volume of sales during the March 2010 quarter when compared to the same quarter last year. Although the volume of land sales has been softening, the national median land value has remained virtually unchanged at $184,574 and on an annual basis values have increased by 6.9%. Across the capital cities, median land values recorded strong increases over the March 2010 quarter in Sydney (8.9%), Perth (6.4%), and Melbourne (4.1%). Median values were flat during quarter in both Brisbane and Adelaide, while values in Hobart fell by 13.8%.
The Reserve Bank of Australia (RBA) released the minutes of their July Board meeting this week. Specifically relating to the residential property market the minutes noted, “There were some signs that conditions in the established housing market had eased. In particular, auction clearance rates in Sydney and Melbourne had declined from their earlier elevated levels, with the clearance rate in Melbourne in June back to around average levels. Price data to May were mixed but provided some tentative evidence of a deceleration in growth relative to earlier in the year. Members noted that price growth had been very strong in Melbourne. Housing credit growth in May had remained at around the average pace of the preceding year.”
The number of new residential property advertisements recorded a large increase last week recording a jump of 9.5% compared to the previous week. The total number of new advertisements were also well above (12.1%) the 12 month average level. Despite the large increase in new listings, total advertisements eased slightly during last week. Although total advertisements have softened, they remain well above 12 month average levels at a time when the residential property market is slowing.
- DISTANCE VERSUS DOLLARS 23rd July 2010 - SPECIALISED PROPERTY GROUP
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Buyers seeking an affordable detached home may not necessarily have to look in the outer fringes of the city. The range in house prices located similar distances from the city can be quite extraordinary. Housing affordability is an issue that is likely to be with us for the foreseeable future. Home ownership is becoming more expensive (last year the average capital city home increased in value by 12.1%) and price sensitive buyers are likely to be the ones that are primarily feeling the pinch.
This is especially the case now that the boost to the First Home Owners Grant has been removed and interest rates have increased by 150 basis points since last October.
For developers, delivering affordable housing stock to a price sensitive market is a real challenge. Median house prices are above $400,000 across all the mainland capitals and range as high as $602,250 in Sydney. Also, many new development projects are hampered by high government charges on development and in many instances this cost is passed on to the end user (the purchaser).
If we undertake an analysis which looks at the most expensive suburbs and the most affordable suburbs by particular distances from the CBD you can see there are still relatively affordable houses available within a reasonable distance from the capital cities. The issue for some buyers is that the more affordable options closer to the city are generally not going to be modern homes with a media room, ensuite and enclosed double garage. Rather, the affordable homes close to the city are likely to be more than 30 years old and have some maintenance issue, but they will probably be on larger blocks of land. For buyers, particularly those seeking to owner occupy, this can be a real dilemma – buy a modern home further out or a modest home closer in.
In Sydney, houses can be purchased for less than $600,000 within 10 kilometres of the city if you look in Sydenham. In Perth you can buy a house within the inner ring for less than $420,000. Meanwhile, within 10km from the Melbourne and Brisbane CBD you can receive change from $400,000 whilst in Adelaide’s inner ring suburbs there are suburbs with a median house price as low as $264,000.
On the other hand, it is interesting to see the most expensive median prices as you move further from the city. In some instances these house prices are pushed upwards because the suburb is located adjacent to the coastline, a river or lake or there is a predominance of acreage blocks; but it is surprising to see just how high some of the prices are in locations further away from the city centre where you would expect prices to be more affordable. Especially considering that in many instances as you move further away from the city centre the options for public transport, efficient arterial road networks and essential services become more scarce.
If we undertake a more detailed analysis of median prices based on the current city-wide median prices and the number of suburbs with a median price above or below that by the distance from the CBD the data tells a very interesting story.
In all five cities the chances of purchasing a house at a price below the median within 10 kilometres of the city are quite small. Adelaide offers you the best chances with 21% of suburbs within 10 kilometres of the city having a median price below $406,500. Perth (15.3%) and Brisbane (13.4%) also offer a greater number of opportunities than Sydney or Melbourne.
Looking at suburbs between 10 and 20 kilometres from the city in all cities more than a quarter of the suburbs sitting within these this 10 kilometre ring have a median price below the city’s median. In fact, in Adelaide and Perth more than half the suburbs have a median house price below the respective metro area median.
As you continue to move further away from the city houses tend to get more affordable. It is important to remember however, that just because a suburb has a median price below the broader metropolitan region median doesn’t necessarily mean that it is going to be affordable. Especially when you consider that in each city analysed the median house price is above $400,000 and in some instances it is significantly higher.
The analysis highlights that although median prices are a good benchmark, you certainly need to dig much deeper than just a city or suburb’s median price when looking to make a property purchase decision.
Generally the further away from the CBD you venture the more affordable prices become although this is not always the case, with some new developments recording significantly higher median prices than those within established suburbs. Clearly many buyers prefer a brand new home and are prepared to pay a premium to live in such a property. For investors these properties also come with the added benefit of depreciation.
For more affordable options closer to the city look for the less publicized and less glamorous suburbs that may be gentrifying. In many instances the amenity level is extremely good and you can secure a house at a comparatively affordable price.
- 2 Story For Sale in Hornsby
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Charming Character Filled Cottage
• 1 bath, 2 bdrm 2 story - $495,000 - Offers Above
Hornsby, New South Wales - This is your chance to buy a well positioned 2 bedroom character filled cottage, located a short distance to centre of Hornsby for little more than the price of a unit.
Glazed concrete tile and updated clad home in excellent condition.
Huge north facing sloping block with massive storage and plans approved for further large shed.
** The owner has asked for ALL GENUINE OFFERS TO BE SUBMITTED FOR SERIOUS CONSIDERATION – THIS PROPERTY WILL BE SOLD THIS WEEK **
Sunny North facing huge 816 sqm block.
Walking distance to Hornsby CBD.
Large lounge and separate dining room.
Upstairs 2nd bedroom / Teenagers retreat with own terrace and kitchenette.
Large main bedroom with built in robe.
Single carport with approved plans for double garage.
Gas heating and cooktop.
Polished floorboards.
Great outdoor entertaining area.
Large garden / storage shed.
New hot water system.
Including fruit trees and outdoor Shade Master blinds.
Secure under house storage.
All weather power points outside.
Must be sold this week, make an offer now!
** The owner has asked for ALL GENUINE OFFERS TO BE SUBMITTED FOR SERIOUS CONSIDERATION – THIS PROPERTY WILL BE SOLD **
Open for inspection for your convenience every Saturday from July 24th 1.30pm – 2.30pm and Sunday 11.00 – 11.45am.
FOR FURTHER INFORMATION contact GREG DUBLER on 0466 695 063.
Specialised Property Group can help with your home search or property appraisal.
We also have extensive contacts with other agents, developers, etc to help find what you are looking for.
WEB: specialisedpropertygroup.com.au
If you would like us to let you know of suitable properties or need additional information, please email us:
EMAIL: greg@specialisedpropertygroup.com.au or speak to one of our team on 1300 65 10 55.
SPECIALISED PROPERTY GROUP
Ground Floor Suite 13 ‘LIFESTYLE WORKING’,
117 Old Pittwater Rd,
Brookvale 2100
Office: 1300 65 10 55.
Property information
- Commercial For Rent/Lease in Cromer
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Workshop or Storage Opportunity
• commercial - $400 AUD Weekly - Plus GST (Gross Rent)
Cromer, New South Wales - Does your business urgently need some secure storage space? Or are you thinking of branching out into your own business. Here is an ideal way to set up in a sought after location! Suitable for a metal fabricator, workshop or suchlike or overflow storage for builders, plumbers, etc.
Dominating a superb position right on the corner of Middleton Road and Dympna Street, this high clearance freestanding warehouse is located right in the heart of Cromer's commercial and industrial district.
This is the hub for this region on the Northern Beaches. It is also close to the main arterial roads leading to the city CBD.
* Handy to major roads and all business services, great marketing exposure to road traffic.
* Plenty of parking in the immediate area.
* Zoning E3 Industrial, 6m+ internal clearance.
* Share 2 x W/c and lunchroom
* Lockable roller shutter door, secure premises.
* 3 Phase power, with ample current of 250 A / phase.
* Size: 99.3sqm approx. (see attached plan).
* Lease terms negotiable, one year plus one year minimum.
* Asking rental $20,800 pa Gross plus GST. That is $400 per week or $1,733.33 plus GST.
FOR FURTHER INFORMATION CONTACT GRAHAM TAYLOR ON:
Mob: 0438 247 033 OR 1300 65 10 55.
Specialised Property Group can help with your property search. We also have extensive contacts with other agents, developers, etc to help find what you are looking for.
web: www.specialisedpropertygroup.com.au
email: enquiries@specialisedpropertygroup.com.au
If you would like us to let you know of suitable properties, just go to our website:
www.specialisedpropertygroup.com.au or speak to one of our team on 1300 65 10 55.
SPECIALISED PROPERTY GROUP
Ground Floor Suite 13 LIFESTYLE WORKING,
117 Old Pittwater Rd,
Brookvale 2100
Office: 1300 65 10 55.
Property information
- INVESTING IN A MINING TOWN 16th July 2010 - SPECIALISED PROPERTY GROUP
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Mining towns back on the radar?
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After the Government has seemingly found a solution to the Resources Super Profits Tax (RSPT), is now the time to consider an investment in a mining or resource driven town?
Investing in a mining town could be described as the property equivalent of investing in a high risk stock. The returns can be significant however, there is also significant downside risk which is why timing and market knowledge is everything.
Now that the Government and the resources sector seem to have come up with an amiable solution to the RSPT a greater level of certainty is likely to improve market conditions in the mining and resource intensive areas. For this reason it may be a good time to consider investing in resource markets. Commodity prices have taken off again in recent times after a substantial slump during late 2008 and 2009. At their worst, commodity prices fell by -35.3% however today, prices are just -5.2% below their all time high and have increased by 43.0% over the last year.
With commodity prices making a strong resurgence it is clear that demand for commodities is ramping up. Given this, there is likely to be a higher level of demand for Australian mines to pull resources out of the ground at a more rapid pace. That means more workers and more demand for housing in what are generally chronically undersupplied markets.
A number of regions appear to have stronger prospects than others based on current demand for Australian minerals. The Roebourne LGA in north-west WA includes the townships of Karratha and Dampier. Dampier is a major shipping port for a number of different minerals but primarily iron ore. The region is right n the heart of a major iron ore mining region.
Median house prices within the region peaked at $910,000 in October 2008. During 2009 house prices fell by as much as -9.3% however, today they are just -3.3% below the peak at $880,000. The region is seeing huge demand for iron ore and the scope to extend the existing townships is significantly limited which results in the high house prices. It isn’t just the prospect of growth In house prices which may make investment in this region so attractive, median weekly advertised rents are recorded at $1,575 which suggests an indicative gross rental yield of 9.3%. The Isaac LGA in Queensland’s Bowen Basin is a region which is well known for being abundant in coal. The Isaac LGA includes the townships of Moranbah, Dysart and Clermont.
Across the region median house prices are recorded at $405,000 and median prices are at their highest ever level despite a slight easing recorded last year. Like iron ore, demand for coal is also surging and the scope to extend many of these townships is also quite limited due to mining leases surrounding the townships. Also similar to the result for Roebourne LGA, Isaac has very impressive indicative gross rental yields which are recorded at 9.0% thanks to current median rents of $700/week. The Western Downs region of Queensland is not yet a really well established mining or resource area however, it does have strong prospects. Located on the Surat Basin there is a significant amount of investigation being undertaken in the region, specifically for coal seam gas whilst it is already home to number of coal mines. The region is also a long established agricultural region. Western Downs house prices and indicative gross rental yields aren’t as high as some of the other regions we’ve highlighted, yet, but this region may be one of the key emerging resource driven markets likely to move from a low price base.
Median house prices sit at $263,000 and have increased by 9.5% over the last year. Meanwhile, indicative gross rental yields are recorded at 5.6%.
As mentioned at the outset, mining and resource towns are by no means a license to print money. These regions hold inherent risk due to their dependence on what is often a singular commodity. Any prospective investor should make an informed decision and make sure they have done their homework.
Some important things to consider before investing in a mining town include: what commodity is being extracted from the region, where is the demand coming from for these resources, how much supply is there, what scope is there for further residential development in the region and what is the worst case scenario if the mine(‘s) are closed down. Knowledge of any region you are investing in is always imperative but it is an absolute necessity in a mining region.
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After the Government has seemingly found a solution to the Resources Super Profits Tax (RSPT), is now the time to consider an investment in a mining or resource driven town?
Investing in a mining town could be described as the property equivalent of investing in a high risk stock. The returns can be significant however, there is also significant downside risk which is why timing and market knowledge is everything.
Now that the Government and the resources sector seem to have come up with an amiable solution to the RSPT a greater level of certainty is likely to improve market conditions in the mining and resource intensive areas. For this reason it may be a good time to consider investing in resource markets.
Commodity prices have taken off again in recent times after a substantial slump during late 2008 and 2009. At their worst, commodity prices fell by -35.3% however today, prices are just -5.2% below their all time high and have increased by 43.0% over the last year.
With commodity prices making a strong resurgence it is clear that demand for commodities is ramping up. Given this, there is likely to be a higher level of demand for Australian mines to pull resources out of the ground at a more rapid pace. That means more workers and more demand for housing in what are generally chronically undersupplied markets.
A number of regions appear to have stronger prospects than others based on current demand for Australian minerals.
The Roebourne LGA in north-west WA includes the townships of Karratha and Dampier. Dampier is a major shipping port for a number of different minerals but primarily iron ore. The region is right n the heart of a major iron ore mining region.
Median house prices within the region peaked at $910,000 in October 2008. During 2009 house prices fell by as much as -9.3% however, today they are just -3.3% below the peak at $880,000. The region is seeing huge demand for iron ore and the scope to extend the existing townships is significantly limited which results in the high house prices. It isn’t just the prospect of growth In house prices which may make investment in this region so attractive, median weekly advertised rents are recorded at $1,575 which suggests an indicative gross rental yield of 9.3%.
The Isaac LGA in Queensland’s Bowen Basin is a region which is well known for being abundant in coal. The Isaac LGA includes the townships of Moranbah, Dysart and Clermont.
Across the region median house prices are recorded at $405,000 and median prices are at their highest ever level despite a slight easing recorded last year. Like iron ore, demand for coal is also surging and the scope to extend many of these townships is also quite limited due to mining leases surrounding the townships. Also similar to the result for Roebourne LGA, Isaac has very impressive indicative gross rental yields which are recorded at 9.0% thanks to current median rents of $700/week.
The Western Downs region of Queensland is not yet a really well established mining or resource area however, it does have strong prospects. Located on the Surat Basin there is a significant amount of investigation being undertaken in the region, specifically for coal seam gas whilst it is already home to number of coal mines. The region is also a long established agricultural region. Western Downs house prices and indicative gross rental yields aren’t as high as some of the other regions we’ve highlighted, yet, but this region may be one of the key emerging resource driven markets likely to move from a low price base.
Median house prices sit at $263,000 and have increased by 9.5% over the last year. Meanwhile, indicative gross rental yields are recorded at 5.6%.
As mentioned at the outset, mining and resource towns are by no means a license to print money. These regions hold inherent risk due to their dependence on what is often a singular commodity. Any prospective investor should make an informed decision and make sure they have done their homework.
Some important things to consider before investing in a mining town include: what commodity is being extracted from the region, where is the demand coming from for these resources, how much supply is there, what scope is there for further residential development in the region and what is the worst case scenario if the mine(‘s) are closed down. Knowledge of any region you are investing in is always imperative but it is an absolute necessity in a mining region. |
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- THE BEST TIME TO SELL - 3rd July 2010 - SPECIALISED PROPERTY GROUP
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Every year the residential market gears up for the Spring Selling Season, this week we take a look at whether or not spring is worth the hype.
Every year we hear all the hype and excitement around the ‘Spring Selling Season’ as September comes closer however, the cold hard facts are that the spring season doesn’t see the greatest level of sales activity although it does record the greatest number of listings.
An analysis taken across sales volumes between January 2000 and December 2009 has found that on a national basis, it is actually March that is the busiest month for house and unit sales. On average over the last 10 years March has accounted for about 9.3% of all dwelling transactions on a national basis. The results have shown that despite the fact that March is the busiest month for sales there is little fluctuation in sales activity except within December and January when sales volumes fall away markedly. Clearly once everything starts to settle down after the Christmas / new year period, attention turns back to the property market resulting in strong sales volumes during March.
Nationally, May has proven to be the second busiest month for property sales with almost 9.2% of all sales followed by: July, October and November.
Given the hype surrounding the ‘Spring Selling Season’, spring is only the second busiest season for purchasers with autumn attracting 26.6% of all sales compared to: 25.4% in spring, 25.3% in winter and 22.7% during summer. It’s also interesting to note that the largest volumes of spring sales are occurring in October which suggests that sales activity takes a while to pick up during the season, especially considering that both October and November record a much higher proportion of sales than September.
Looking at individual capital cities, in Sydney and Melbourne May has proven to be the busiest month for sales. Whilst in all other capitals except for Adelaide and Darwin, March is the busiest month for property sales. Within Adelaide, June has proven to be the busiest month for sales.
As a rule, you can’t have the sale of a property without it being listed for sale first and it takes a while to finalise the sale. Given what we have uncovered you would expect that February or March should be the busiest period for listings given the high level of sales activity in March, but it’s not so.
Nationally over the five years to December 2009 the greatest volume of listings occurred during November which recorded more than 9.1% of all listings. Coming in second is October which has accounted for 8.9% of all sales. It is interesting to see that the volume of listings climbs to its highest levels at a time when the market is approaching its slowest period for sales (December and January).
Across the individual capital cities, November is generally the busiest time to advertise a property for sale. Sydney, Melbourne, Brisbane, Adelaide and Canberra all recorded November as their busiest month for listings. Brisbane had October as its equal busiest month whilst Perth’s busiest month for listings was March and Darwin’s busiest month was September.
The results show that spring is the busiest period to advertise a property however, it is interesting to note that it is the later part of spring which is the busiest time for listings. September, which kicks off the ‘Spring Selling Season’ is still the third busiest month of the year for listings however, the proportion of listings is below that recorded during October and November.
Although there is a ramping up in listings from August through to November, the increase in listings is not matched by a similar ramping up in sales activity. The strongest increase in sales activity is recorded between January and March each year at which time listings also ramp up.
Given these results the question needs to be asked, why are listings at their greatest level during a period of the year which, although it does see a significant level of sales activity doesn’t record the greatest level of activity? We suggest it is because coming out of the cold of winter the temperature is warmer and the flowers are blooming making it more attractive to lure potential buyers out of their homes and the homes for sale present better than they do through autumn or winter.
Despite this fact, you would think that you should have the greatest number of listings during the time when you record the greatest number of sales but this has not occurred. For vendors the results suggest that if you are looking to sell your property March (or autumn) is the time to do it as it is the month where historically the most sales have occurred. Given this, it is logical to expect that March would be the month when most buyers are actively looking to purchase property.
For purchasers, spring is the time in which they will generally have the greatest amount of choice within the market. However, if you are looking for the best deal, it may be wise to look around Christmas / new year. Despite that fact that at that time there are fewer properties listed for sales there is also a much lower level of competition for the housing stock and you may be able to get a better price.
- BUILDING STARTS IMPROVE July 2nd 2010 - SPECIALISED PROPERTY GROUP
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New home building has undergone a major recovery but will need to keep improving, the Housing Industry Association (HIA) said this week.
The association's quarterly National Outlook Report shows that housing starts are forecast to increase by 20 per cent in 2010 to a level of 165,940, before falling back by 3 per cent in 2011.
On a financial year basis, the number of housing starts is forecast to increase by 22 per cent in 2009/10 and 2 per cent in 2010/11 to reach a level of 162,600. Starts are forecast to be flat in 2011/12.
HIA Chief Economist Dr Harley Dale said that Australia needs to build over 190,000 dwellings in 2010 alone to meet underlying demand.
"And over the next ten years we need to build 420,000 dwellings more than we built over the last decade", Dale said.
"Meanwhile the renovations sector is looking healthier with three consecutive quarters of growth through to March this year.
"Total renovations hit a new quarterly record in March 2010", he added.
Improving labour market conditions and existing home price gains are forecast to see the total worth of the renovations sector increase by 7 per cent in 2009/10.
"Growth of 4 per cent is forecast in each of the subsequent two years, taking renovations activity to a worth of $36.4 billion in 2011/12", Dale said.
"The recovery in the renovations sector includes signs of growth in major alterations and additions which encompasses structural extensions, an important component of the overall housing industry", he concluded.
- AUSTRALIAN HOUSING MARKET CONTINUES TO COOL - 1st July Update - SPECIALISED PROPERTY GROUP
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RP Data – Rismark Home Value Index Release Australian capital cities have recorded their second consecutive month of single digit annualised growth. Capital city values were up 0.6 per cent in May while ‘Rest of State’ markets recorded a fall of -0.9 per cent.
The deceleration in capital growth rates first evidenced in RP Data-Rismark’s April index results has continued in May, with capital city home values rising just 0.6 per cent (0.5 per cent seasonally adjusted) and non-capital city values falling by -0.9 per cent (-0.2 per cent seasonally adjusted) over the month.
RP Data’s director of research Tim Lawless said RP Data-Rismark’s May index results reinforce mounting speculation that the Australian real estate market is transitioning towards a lower and more sustainable growth path, which will be encouraging for the RBA.
“This second consecutive month of single-digit annualised gains sends a signal that the double-digit growth rates recorded since January 2009 are behind us. The signposts have been in the market for several months now with lower auction clearance rates, fewer housing finance commitments, and weakening consumer confidence,” he said
Rismark International managing director Christopher Joye, expects to see more of the same over the remainder of the year.
“With disposable household incomes forecast to increase by only around 5 per cent in 2010, we have long predicted subdued dwelling price performance for this year. There is, however, some good news for borrowers on the horizon. Employment growth remains robust with unemployment forecast to fall back in line with its 4-5 per cent “full-employment” level. More importantly, the futures market is pricing in just one further rate hike through to 2012, which means borrowing costs should remain steady. The latest population growth estimates also show that net overseas migration is running at over 200k per annum, which is well above the government’s long-term forecast of 180k.”
RP Data-Rismark’s new “Rest of State” Hedonic Index, which was developed for the RBA, shows that the disconnect between the capital city and non-capital city markets, is as wide as ever.
According to RP Data’s Tim Lawless, “In the 12 months to May 2010, home values in Australia’s capital cities grew by around 12 per cent. In contrast, growth in the non-capital city regions has been just 5.8 per cent. Since around 40 per cent of all homes are not located in the capital cities, being able to accurately measure the price dynamics in the rest of state markets using our hedonic index technology is a very important development.”
Rismark’s Christopher Joye added, “This is simply a function of demand and supply. The demand for homes is stronger in the major conurbations whereas the supply of new dwellings has been weak. In comparison, the smaller metro and regional markets have relatively less demand combined with much more elastic housing supply.”
According to RP Data’s Tim Lawless, Melbourne’s value growth has been spectacular.
“When you include the strong capital gains recorded prior to the GFC, which was 21 per cent over the 2007 calendar year, Melbourne home values have risen by 51 per cent in less than 3 and a half years. The gap between Melbourne and Sydney dwelling prices is now just 7.2 per cent, which is the narrowest on record.”
At the other end of the growth spectrum, the Perth market continues to show signs of weakness. Perth is the only capital city to record a quarterly decline, with home values down -2.1 per cent over the three months to end May. Perth home values are currently -2.7 per cent below their March 2010 peak. While the recovering resources sector has yet to make a large impact on the Perth housing market, continued population growth, employment growth and slowly improving affordability should eventually see a more enduring upswing.
Tim Lawless said he believed concerns in some quarters about a big market correction taking place are overstated.
“The market’s underlying fundamentals are such that any material fall in home values is unlikely. Housing supply remains very low at a time when housing demand is healthy, interest rates appear to be on hold for the foreseeable future, and the Australian economy is performing well compared to all other developed countries”, he said.
Consistent with the moderation in housing market conditions, Rismark’s latest estimate of Australia’s “dwelling price-to-income ratio” remained steady at 4.6 times. This is in line with Rismark’s estimate of the average national dwelling-price-to-income ratio since the end of 2003 of 4.4 times. In a recent speech, the Deputy Governor of the RBA Ric Battellino confirmed this analysis, which is the first to compare all-regions dwelling prices with all-regions incomes, commenting:
“People feel that house prices in Australia are quite high, and that’s quite often because the ratio of house prices to income that are published for Australia tend to focus mainly on prices in the cities, and they are quite elevated. But, if you look across the whole country, the ratio of house prices to income is not that different from most other countries...
The house prices in cities aren’t high relative to the income in the cities because most of the figures you see published on house prices to income – what they do is they measure house prices in the city and express it as a proportion of income of the whole country. But, if you do house prices relative to the incomes of the people living in those areas, then the prices in the cities also are quite reasonable."
Other leading indicators suggest that the Australian market remains relatively healthy. The total number of properties available for sale is about the same as last year, with RP Data currently tracking 207,664 properties being advertised for sale – almost identical to the figure from 12 months ago (207,788 homes). The average selling time is now about 39 days for houses and 31 days for units. The average level of vendor discounting remains at about 5.5 per cent suggesting vendors are not having to cut prices dramatically to sell a property.
RP Data’s Tim Lawless said, “If we were seeing the number of properties available for sale increasing dramatically, the average selling time blowing out, or vendors providing large discounts on their asking prices it would set off a few alarm bells. This, however, is not currently the case.” |
- PROPERTY UPDATE 26th June 2010 - SPECIALISED PROPERTY GROUP
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It’s been a slow week for property data this week, however next week the latest RP Data-Rismark Home Value Index results will be released which will provide indicative results for May 2010. Last month’s Indices showed a significant slowing of the residential market with capital city house values increasing by 0.1% for the month and unit values up 0.5%. During March 2010 house values had climbed 1.3% and unit values increased by 1.4%. Most lead indicators are well and truly indicating that the market is slowing: housing finance commitments continue to fall, as does consumer sentiment, interest rates are 150 basis points higher than their recent lows, dwelling approvals fell by -14.8% during April and auction clearance rates continue to trend down. Given these results we anticipate that the rate of property value growth during May 2010 will once again be soft and this trend is likely to continue until at least the time of the spring selling season when market activity historically begins to rebound.
We also anticipate that our lead indicators such as vendor expectation error (discounting) and time on market will increase further due to the slower market conditions.
Advertised Stock on the Market
 The volume of newly advertised property listings entering the market over the last week has fallen by -6.7% (keeping in mind that last Monday was a public holiday in most parts of the country). The total volume of new listings also sat -4.7% below 12 month average levels during the last week. As a result of the easing in new listing volumes, total property listings have also fallen during last week. Total listings were down -2.3% from the previous week however, the total amount of stock available for sale remains 2.0% above the 12 month average. It is encouraging to see that as market conditions slow the total volume of listings on the market is also easing.
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- PROPERTY UPDATE - 25th June 2010 - SPECIALISED PROPERTY GROUP
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Investors arrest slowdown
Price growth for residential properties may slow down in 2010, but investors will keep interest alive in the market, according to industry analyst and economic forecaster, BIS Shrapnel.
According to the company's Residential Property Prospects, 2010 to 2013 report, lending activity is already easing, with first-home buyer demand in the March quarter of 2010 down by 44 per cent on the same period last year and `upgrader' activity plateauing. This is flowing through to softer demand for residential property.
BIS Shrapnel senior project manager and study author, Angie Zigomanis, says a combination of factors have caused the momentum that built up in house prices in the second half of 2009 to stall in 2010.
"The strong price growth in the second half of 2009 was a rapid adjustment to housing variable interest rates that were at 40-year lows," says Zigomanis.
"With interest rates quickly lifting from these `emergency' levels, and the current variable rate of 7.4 per cent now being close to long term trends, the recent levels of price growth cannot be maintained."
BIS Shrapnel does not expect house prices to fall, however. Investors are beginning to return to the market and pick up some of the reduction in owner-occupier demand - loans to investors were up by an annual 26 per cent in the March quarter of this year.
While rental growth did slow in 2009, part of the slowing was due to first-home buyers moving from rental to owner-occupation, as well as the lower interest rates reducing the incentive for landlords to pass on further interest rate rises.
"Even though overseas migration inflows are steadily easing, a deficiency of stock is still in place with dwelling construction below underlying demand," says Zigomanis.
"This is expected to put pressure on vacancy rates and result in stronger rental growth later in 2010. The deficiency of dwellings, and improved rental picture, will continue to maintain investor demand and assist prices.
"In addition, the current round of interest rate rises is expected to have run its course, with further rises expected to be more moderate," adds Zigomanis.
"Our forecast is for the cash rate to increase by 50 basis points in 2010/11, and a further 50 basis points in 2011/12. The more stable interest rate environment is expected to underpin purchaser confidence as economic conditions continue to strengthen, and should continue to push through moderate house prices rises."
In effect, the surge in prices in the second half of 2009 in most cities has `front loaded' price growth in this upturn, leading to a flatter cycle in prices as the economic recovery continues. Higher interest rates will maintain price growth at a more moderate level, despite the acceleration in economic growth driven by the recovery in resources investment.
"Normally price growth is moderate at the beginning of the upturn and accelerates to a peak at the end of the cycle as economic growth also peaks," explains Zigomanis.
"However, the very low interest rates in 2009 initiated stronger rises, so the sharp 1.5 percentage point rise in the cash rate between October 2009 and May 2010 has already begun to strain affordability, causing future price growth to be more muted."
Among the state capitals, BIS Shrapnel forecasts those starting from the lowest price base will experience the most solid price growth. Real house prices in both Sydney and Perth are still below their previous peak levels, and this should underpin stronger growth relative to the other capitals. Price levels in Adelaide are below the other mainland capitals.
More moderate growth is expected in Brisbane, Hobart and Canberra due to weaker underlying demand and local economic conditions over the next three years, while the very strong price rises in Melbourne and Darwin have pushed affordability and will limit further rises.
- PROPERTY UPDATE 18th June 2010 - SPECIALISED PROPERTY GROUP
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Where can the average buyer afford to purchase? Here is an interesting article from RP Data . . . what do people think about these figures?
Housing affordability remains an issue however, there are still options for the price sensitive purchaser… they just need to target areas further away from the CBD.
Housing finance data released last week showed that across the country non first time buyers in New South Wales had the greatest average loan size at $315,400 and Tasmanian’s were taking out the smallest average loans at $194,000. It is extremely rare that anyone would be receiving a 100% loan so for the purposes of the following analysis we have assumed that borrowers have a 10% deposit, therefore they are borrowing 90% of the total value of the loan. Based on this assumption we can determine their borrowing power which indicates how much the purchaser could have potentially purchased a property for.
On average, purchasers in New South Wales demonstrated the greatest buying power, spending on average $350,444 and Tasmania purchasers had the least amount of buying power at $216,556. This outcome is to be expected and reflects the characteristics of these markets with New South Wales having the most expensive property market and Tasmania the most affordable.
Looking at capital cities we are all aware that affordability is an issue however it is interesting to note that across all house sales within capital cities, Sydney, the nation’s most expensive housing market, actually had the greatest proportion of total sales priced below the determined level of borrowing power. 21.8% of all Sydney house sales were priced below $350,444. Obviously most of these are situated in the outer more affordable areas of the city however, it shows that affordable property is still available. The next best performer was Canberra where 15.3% of house sales were priced below $301,556.
Affordable property is much harder to come by in Perth. Only 11.8% of all Perth house sales during the last 12 months were at prices below $324,444. As is the case in most instances the areas where these properties are available are generally the outer more affordable regions of the city.
The Campbelltown Local Government Area (LGA) on the southern outskirt of Sydney has a current median house price of $317,500 which is well below the average borrowing power for the city. As a result, Campbelltown has had the greatest proportion of affordable sales of any capital city council area in the country over the last year. 71.1% of Campbelltown’s house sales were priced below $350,444 during the last year.
Across the list of LGA’s / Districts detailed, Sydney LGA’s led the way providing nine of the 20 capital city LGA’s with the greatest proportion of sales being affordable for non first time buyers. All of the Sydney LGA’s detailed are situated some way from the CBD area and all have a median price below $400,000.
Darwin LGA’s were the only regions which had no representation on the list however, Brisbane, Adelaide and Canberra each had only one LGA.
The result of the analysis shows just how important it is to dig a little deeper with data. The housing finance numbers show us how much people are borrowing and with a few assumptions we can determine where these buyers can afford to live.
Clearly if you are an average income earner and want to own a house it’s pretty unlikely you are going to be able to live in the blue chip inner city suburbs (although there are some examples, very few, within these areas). If you are an average income earner looking to buy property, more than ever location is becoming the most important attribute. The best prospects for growth in property value and the most desirable locations in which to live are those suburbs which enjoy proximity to: public transport, retail and social amenity, schools, working nodes, health care, public open spaces and major roads.
Whilst the locations where the affordable properties tend to be located may not have all of these attributes certainly many of them have a number of the desirable features and purchasing in those areas will likely make for a more enjoyable place to live as well as greater potential for future price growth.
- PROPERTY UPDATE 11th June 2010 - SPECIALISED PROPERTY GROUP
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June 11th, 2010 Comment from RPData.
The recently announced New South Wales Budget sets out some of the most strategic property related initiatives seen to date, with incentives aimed at improving housing supply and affordability rather than simply throwing money at the symptoms.
The most important announcement was that stamp duty, largely viewed as one of the most inequitable and inefficient taxes around, has been axed for those people purchasing a home ‘off the plan’ and under $600,000. An ‘off the plan’ purchase basically means buying the home before construction is completed.
At a consumer level the benefit is clearly in the stamp duty savings which could equate to as much as $22,490 on a home purchase.
The real strategic component in the announcement is the economic benefit that NSW is likely to experience from an improved housing development environment. The multiplier effect of housing construction is well documented. Every dollar spent on housing is leveraged almost three fold through increased levels of employment, manufacturing, resource extraction, materials fabrication etc.
Additionally, a new home purchased is generally accompanied by the purchase of new furnishing, white goods and often a new car.
There are a whole range of peripheral industries that benefit as well. Storage and transport services, insurance and financial services, machinery and equipment sales… the list goes on.
Other announcements in the budget are also likely to set a solid example to other state Governments. The capping on council charges for development at $20,000 provides a huge step forward. Previously development charges per block could be as high as $60,000 in NSW and there was very little consistency between councils and regions. The cap provides a vast improvement in the level of certainty surrounding development costs that will improve the developer cost forecasts which should make it easier to obtain finance from the banks.
This initiative should also enhance the ability of developers to deliver affordable blocks of land. Higher costs in most instances get passed on to the end user – the purchaser. With development charges slashed, developers should have scope to pass on these cost savings to the end user. So… a big tick for the NSW Government for taking an appropriate and strategic step forward in addressing the core problem of housing undersupply in the most undersupplied state in the nation. The Government is channeling demand into an industry that will provide the most highly leveraged economic outcome for the state as well as providing a solid leg up for consumers to buy into the most expensive market in the nation.
- ZERO STAMP DUTY LURE TO BOOST HOME SALES - SPECIALISED PROPERTY GROUP
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NSW retirees are being coaxed into selling their oversized houses and downsizing to newly built residences, in a NSW budget plan aimed at boosting the new homes industry.
Homeowners aged over 65 are being offered stamp duty savings up to $22,490 to encourage them to move.
The discount applies to purchases of newly constructed houses and units, off-the-plan acquistions, and house and land packages.
The senior downsizers will pay zero stamp duty on property purchases costing up to $600,000 in what is billed as a policy first for the housing market.
About 70 per cent of NSW sales are under $600,000.
NSW houses have a $546,000 mean price, and units a mean of $457,000, according to the most recent Housing NSW data.
The state government scheme extends stamp duty cuts from the traditional preserve of first homebuyers, who have preferred to buy established residences, as part of its concerted attempt to kick-start the ailing residential construction industry.
The budget also offers zero stamp duty - and the potential saving of $22,490- to all home buyers and investors, albeit with a strict restriction.
It will only be available if they put a deposit down for an off-the-plan purchase or house and land packages costing less than $600,000.
There will also be a 25 per cent stamp duty cut for home buyers and investors - and a potential $5623 saving - if construction is already under way.
The stamp duty discounts will be available for the next two years.
NSW Treasury expects between 1000 and 2000 seniors to take up the offer annually following its July 1 start date.
Another 5000 to 6000 investors and home buyers are expected to take up the wider off-the-plan offering, at an annual $60 million cost to revenues.
The government has budgeted for the seniors zero stamp duty initiative to cost $10 million in each of the next two years.
The seniors must sell their primary place of residence to move into the newly constructed house or unit.
"For people aged over 65, it won't matter at what stage of construction the home is - they will pay no stamp duty," NSW Treasurer Eric Roozendaal said.
The newly constructed homes for seniors must not have been previously occupied or previously sold.
For couples, at least one of the parties must be aged 65 or over to be eligible.
The initiatives are designed to help lift the NSW housing construction out of the doldrums.
NSW housing construction has been trailing Victoria for the past five years and Queensland for the past four years.
Last June, NSW housing construction fell to record lows when just 422 units and townhouses were approved, compared with the previous 10-year June average of 1400 approvals.
"The zero transfer duty for people aged over 65 will contribute both to the goal of helping older homeowners seeking to downsize their home, and the goal of encouraging new home construction," the budget papers said.
"The greater concession for purchasing off the plan will assist the financing of new developments."
Courtesy of SMH, Jonathan Chancellor, Property Editor.
- RESERVE BANK KEEPS RATES STEADY 1ST JUNE 2010 - SPECIALISED PROPERTY GROUP
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Finally, the Reserve Bank keeps rates steady
Reserve Bank Board meeting
• For the first time in four months the Reserve Bank has elected to leave interest rate settings on hold. The cash rate remains at 4.50 per cent.
• It is what left unsaid that stands out in the Reserve Bank’s statement. The statement is surprisingly short and makes no reference to housing prices, consumer spending or the job market. The Reserve Bank Board says that monetary policy settings are “appropriate for the near term”, pointing to an extended stay on the interest rate sidelines.
What does it all mean?
• You can almost hear the collective sigh of relief across Australia. Over 2008 and 2009 Aussie consumers and businesses had to contend with the North Atlantic financial crisis. And as soon as it finished then the Reserve Bank embarked on rapid fire rate increases. The only time that most people have been able to draw breath was at the start of the year. Now there is a second opportunity for Aussies to take stock.
• Aussie consumers and businesses are understandably shell-shocked and now need a little time to adjust to the new financial environment. So the hope is that this time around the pause in rates last longer than one month.
• The Reserve Bank has no doubt been surprised at the extent of caution exercised by consumers. Surveys have regularly suggested that confidence levels are high, but the evidence at cash registers shows that people aren’t putting the money where their mouth is. Still, when faced with an aggressive Reserve Bank, it’s clear that the caution is justified.
• Interestingly economists have a cash rate of around 5.00-5.25 per cent priced in by end year but financial markets are less sure, tipping rates won’t move over the next six months. As always it will depend on how inflationary pressures track over the remainder of 2010. But given that retailers are actively discounting rather than putting prices up, inflation doesn’t appear set to soar any time soon.
• CommSec believes that the economy will lift later in the year, meaning borrowers should factor in rate increases of up to half a percent. But in the current environment this appears more of an upside risk. As we have seen over the past two months, the environment can effectively turn on a dime. The optimism that was in abundance in mid April has now given way to fear and uncertainty with investment markets increasingly skittish.
• The shift in views in recent months is clearly in evidence in the bond market with yields on three-year government paper falling around 75 basis points (or three-quarters of a percent) in just the past month.
Interest rate decision and past cycles
• The Reserve Bank Board has left interest rates on hold for the first time in four months, leaving the cash rate at 4.50 per cent. In October 2009 cash rates stood at a 49-year low of 3.00 per cent. But then the RBA embarked on a process to remove the emergency stimulus, lifting the cash rate by a quarter of a percent in October, November and December 2009, and then in March, April and May 2010.
• In the last rate-cutting cycle the cash rate fell to lows of 4.25 percent in December 2001. In the two previous rate-cutting cycles, the cash rate fell to lows of 4.75 per cent.
• But given that banks have been forced to lift rates above the cash rate, the Reserve Bank has looked more closely at the variable housing rate to gauge how close rates are to “normal”. Currently the average bank variable housing rate stands at 7.40 per cent, above the long-term average or “normal” rate of 7.15 per cent.
• The Reserve Bank says: “Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.”
What are the implications of today’s decision?
• The $64 million question is how long will interest rate settings remain on hold? Clearly consumers and businesses would love some assurances. Unfortunately that’s not possible – even the Reserve Bank would be hard-pressed making sense of the volatile environment. But certainly people need some sense of the interest rate trajectory so that they can plan and generally get on with business.
• The six-month overnight indexed swap rate is as good as any indicator in providing views on the interest rate outlook. And at present the pricing points to no change in cash rates until much later in the year.
• Housing and retail-focussed businesses have most to celebrate in today’s ‘on hold’ decision by the Reserve Bank – especially retailers of discretionary, non-essential or luxury goods.
• Looking ahead, it is clear that the Reserve Bank has sole responsibility for keeping the economy on the straight and narrow. The Federal Budget confirmed that fiscal policy isn’t playing an active role at present with the ‘automatic stabilisers’ relied upon to improve the budget bottom line as opposed to discretionary spending cuts or tax increases by the Government. So if the economy picks up pace, the focus will again switch to rate hikes.
• The modest size of the accompanying statement from the Reserve Bank almost suggests that Board members had to leave the meeting in a hurry. We are now effectively in the dark about its views on the economy given that most of the statement focussed on Europe, not Australia.
Comparing the two most recent statements
• The statement from the May meeting is on the left; the statement from today’s June 2010 meeting is on the right.
MEDIA RELEASE
No: 2010-11
Date: 1 June 2010
Embargo: For Immediate Release
STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY POLICY
At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per cent.
Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets. Investors have generally displayed a good deal more caution. As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns. The Australian dollar fell sharply as part of this adjustment. Commodity prices have also softened, though those important for Australia remain at very high levels. European policymakers have responded by assembling a large package to provide financing for the relevant countries for a period of time, stabilise bond markets and provide liquidity. They have also committed to action to bring budget deficits down and stabilise debt over time.
The effects of these various factors on the world economy will need to remain under review. At this stage, global growth is still expected to be at about trend pace in 2010. Conditions in Europe overall have been relatively weak, and the foreshadowed budgetary tightening will probably mean that this will continue, but growth is becoming more established in North America. In Asia, growth has continued to be quite strong and may need to moderate in the year ahead. In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing. Inflation appears likely to be in the upper half of the target zone over the next year.
Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago. Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.
- WEEKLY PROPERTY NEWS UPDATE 4TH JUNE 2010 - SPECIALISED PROPERTY GROUP
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The Rpdata.com Market Activity Index has recorded a rebound this week with the Index sitting at its highest level since the middle of March. The results shows that pre-listing activity remains at very high levels and provides an indication that the number of new properties coming to market is likely to be higher over the next month.
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| The RP Data-Rismark Home Value Index released this week showed that capital city home values increased by just 0.2% during April 2010 after recording growth of 1.3% in March. For houses outside of the capital cities, values fell by -0.2% over the month. Despite the softening growth rates, capital city property values have increased by 11.9% over the last 12 months whilst those areas outside of capital cities have recorded rates of growth less than half this, at 5.6% over the year.
No doubt these latest results showing a slowdown in the rate of property value growth along with weakening housing finance data, a significant fall in consumer sentiment, easing auction clearance rates and a run of interest rate hikes, has weighed heavily on the decision by the Reserve Bank to keep interest rates on hold this month. The results certainly seem to show that the rate hikes to-date have had the desired effect of slowing the rate of growth in residential property however, evidence suggests that these hikes are now stifling new construction.
Dwelling approvals data released this week showed a significant fall, with approvals for private homes falling by -13.5% during April 2010. This was the biggest monthly fall since July 2000. Total dwelling approvals fell by -14.8%, their greatest monthly fall since November 2002. Meanwhile, private unit approvals were down -5.4% for the month.
Advertised Stock on the Market
 The volume of new properties entering the market and the total number of properties available for sale are both sitting at levels well above 12 month averages with new listings 12.5% above average and total listings 4.1% above average.
Latest National Auction Clearance Rates
 Auction clearance rates continued to ease again last week with the weighted average auction clearance rate recorded at 62.7% and represents the fourth week in a row where weighted average clearance rates sat below 70%. Melbourne’s auction clearance fell further last week to 68.8%. Sydney’s auction clearance rates also fell further during the week and are now recorded at 62.1%
Want to know the auction results for your local area? Log into rpdata.com and go the Auction Results panel on the top right corner of the home page.
Number of Properties Advertised for Rent
 Across the nation the total number of new rental listings has jumped from 24,708 last week to 26,906 this week. As a result, total listings have also increased from 53,333 last week to 55,517 this week.
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| With the premium residential market recording the highest capital gains over the last 12 months, the number of suburbs with a median price of at least $1 million have become more common.
Over the 12 months to February 2010 there were 165 suburbs nationwide that recorded a median price of at least $1 million for either houses or units. In comparison, during the previous 12 months there were 147 suburbs nationally with a median price of at least $1 million, indicating that the number of $1 million suburbs has increased by 12% over the last year. Despite the jump in $million suburbs, there are still fewer than what was recorded pre-GFC.
Interestingly, during the year to February 2008, Western Australia had 36 suburbs with a median price of more than $1 million. As at February 2010 there were 26 suburbs with a median of at least $1 million, 10 fewer than that recorded at the peak. The total number of $1 million suburbs remains below the Feb-08 peak also in New South Wales, Queensland and the Australian Capital Territory but in each instance it is only one suburb fewer than the peak.
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Commercial: Tenant upgrades to owner-occupier
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|  Two adjoining industrial properties in South Melbourne have been sold at auction by agents of Lemon Baxter to one of their tenants.
The separately-titled premises at 136 and 142 Montague Street South Melbourne are leased until September 2010.
Lemon Baxter selling agent, Richard Curtain, marketed the Industrial 1-zoned properties, which were sold together at auction for $1.65 million.
The two properties have a combined frontage of 21 metres to Montague Street, combined site area of 395 sqm and combined building area of 495 sqm.
Number 136 Montague Street is a single level industrial building of 200 sqm while Number 142 Montague Street has an area of 276 sqm including 76 sqm on the first level.
Mr Curtain said he had anticipated that the buildings would suit an owner occupier with the potential to occupy one or lease the other, or for a developer to redevelop the older-style buildings.
“The purchaser in this instance was one of the present tenants Theo’s Meat Supply,” said Mr Curtain.
“Both buildings have concrete floors each with roller door access and the steel deck roof over each property has also been replaced recently.” |
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Blog: The inflation wildcard
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| Interest rates may be on hold, but any rise in the June quarter inflation figures is likely to see another rate hike.
This month the Reserve Bank (RBA) thankfully decided to keep interest rates on hold, and the wide spread speculation is that the cash rate will remain on hold until early next year. Australia’s average standard variable mortgage rate is sitting at 7.4% – just slightly higher than the ten year average (7.24%).
In a statement from RBA Governor Glen Stevens, the Bank cited concerns about the effect of deteriorating health in the European economies and financial markets on the global economy. In balance, the Governor also highlighted that prices for Australian commodities remained high and global growth is likely to track at trend levels. |
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