Residex’s September data revealed that most capital cities have a flat market.
Although August has seen very little improvement, it is still better that the results of a few months ago, when values had dropped significantly.
John Lindeman works as a Residex business development manager. He says that “if you look at last month, it’s better than last quarter” and that sales have been rising in Sydney and Melbourne so, despite the talk about falling listing numbers, the sales are actually higher in this quarter.
There are also signs that the Reserve Bank of Australia’s massive rate cut, largely passed on by lenders, and the Rudd government’s $1.5bn First Home Owner Grant (FHOG) boost are already having a positive impact on the market.
John Edwards, chairman of Residex, says he’s already seeing increased energy in the property market after the increase of the FHOG to $14,000 for purchase of an existing home and $21,000 for newly constructed homes.
“The federal government’s actions clearly indicate they’re not prepared to see our housing values deteriorate any further,” says Edwards.
They are aware that the housing market has a significant multiplier effect and can have serious implications. They also know that a decline in these assets will result in higher defaults, and lower consumer confidence. This will result in fewer jobs and a greater chance of our banks getting into financial trouble.
He stated that the economic areas that have the greatest flow-on impact were the most important for maintaining the economy’s momentum.
“All housing stakeholders can feel comfort in the government’s actions, which tell us that our housing markets will not follow the US and UK markets. It states that if you have the money to invest, this is a great time to search for bargains and make investment decisions. These opportunities will not be available again in the future.
Concerns about oversupply in the NT capital – home to fewer than 100,000 people – continue to plague the region, with experts maintaining that Darwin is a risky market to buy into.
Paul Smith, Braxton Chase’s marketing director, said that the oversupply on the foreshore as well as the slow decline in the economy of the NT should have an impact on the property market. This weakness should be mitigated with recent interest rate reductions.
After Delia Lawrie (the planning and lands minister) announced that a $50m plan would be implemented to free 3,000 residential lots for Palmerston in 2008/09. This was a step forward from 2010/11.
These lots will go in the new suburbs Johnston and Zuccoli. In 2009, 200 blocks will be available.
Bellamack is an area near you that has lots of homes for sale.
Lawrie stated that 15% would be used for affordable housing. Johnston, which is home to 850 lots of land, will be the first suburban development. Mitchell has 400 lots, while Zuccoli has 1,750 lots.
The government was previously reluctant to allow land releases faster, fearing it would flood the market. Lawrie says that each year, 300 lots more land is added to the Greater Darwin Market than is necessary to meet growing demands.
“The marketplace is demanding … additional lots. She states that “We are very determined to follow land release along the Berrimah corridor.”
“We’re committed to ensuring that future land release occurs strategically, to ensure it doesn’t flood the market and devalue the investments of people who own property.”
Sydney realty is driven by high rents, as well as high interest rates. Investors who are more inclined are attracted to them.
Mathew Tiller, a PRDnationwide property expert in NSW, states that buyers have had to delay buying a property due the high cost and low affordability in Sydney. These buyers have turned to renting, which has significantly increased the demand for rentals in Sydney.
“The upside of this is that investors have been drawn back to Sydney’s property market by rising rental yields and volatility within certain property markets.”
The 2008 Sydney realty market has remained fairly flat. Tiller stated that the key issues facing the Sydney property market in 2009 will be affordability as well as rents.
However, as the gap between rents and mortgage repayments continues to narrow – particularly in light of the fatter First Home Owner Grant that’s on offer – renters are increasingly beginning to weigh up their home ownership options.
Tiller also states that downsizing is a significant driver. Many homeowners with large mortgages and expensive homes decide to sell to reduce their monthly payments.
Due to falling mortgage interest rates, he believes the Sydney market will rebound in 2009. He believes that the best areas to grow are those that are affordable but still provide high rental yields.
Tiller says these areas include Sydney’s inner West (Bankstown Local Government Areas, Leichhardt Local Government Areas) and the St George Region in South.
“The Ryde LGA is located north of Sydney and is expected to attract attention. There are further infrastructure improvements as well as a new center.
The best deals are available in the western suburbs for first-time homebuyers and those looking for large houses at a fair price.
In the west suburbs, values have fallen due to decreased demand over the past few decades.
Suburb spotlight: Dulwich Hill
Dulwich Hill is located approximately 10km from the CBD of Sydney and is experiencing a revival in its life. The younger population is moving to the area to be near their CBD offices and to enjoy all that Sydney has to offer.
According to RPData the median house price was $661,000.
Over the same period, the average apartment value increased by 4% to $335,000.
Ray White Maroubra’s Anthony Kassis says that “Dulwich Hill”, a progressive suburb, is in transition. This phase has seen a shift in population and increased popularity. This will guarantee capital growth.
It is located in the suburbs of Newtown, Leichhardt, with easy access to all amenities.
It is easily accessible from major roads, and it has a train station.
Kassis stated, “Residents have easy access to the city’s suburbs and the surrounding areas via rail services or public buses.”
Melbournes residential real estate market has shown signs of moderate stability in the face of ever increasing global market turmoil, and the recent cuts in interest rates are giving buyers the confidence they need to enter – or stay in – the market.
Paul Smith, Braxton Chase’s marketing director, stated, “Vacancy rates remain very low at approximately 1%, and this gives investors more confidence.”
Melbourne’s resilience is based on the supply and demand issues. Population continues to grow at a fast rate, with over 60,000 migrating to the city over the last financial year – more than any other capital city – and this trend is set to continue, mostly due to international immigration.”
He also stated that strong population growth would be “one of major drivers for capital and rental yields in the medium term.”
David Grima is a Colliers International research analyst who believes Melbourne has strong foundations which will allow it “prosperous growth” in the future.
“It is anticipated that Melbourne’s population will surpass that of 2007-10, which combined with the low vacancy rates suggests that supply has become more closely aligned to demand.”
“In reality, Melbourne’s residential apartments market could be undersupplied until 2011, which would likely reduce the vacancy rate and increase rental rates.
Real Estate Institute of Victoria data shows that the rental vacancy rates for properties in inner Melbourne has dropped to 1% over the past 25 year.
Grima says that Melbourne’s vacancy rate has been falling since 2002 because of strong population growth and slower completions.
“This is an unheard of low and it reflects the strong demand in Melbourne to rent properties, especially in inner Melbourne.”
Janet Spencer is the director of Buyer Solutions, a Melbourne property consulting firm. She says that first-time homebuyers who are “sitting on their fence for a while” will be encouraged to explore all options.
“They now have $14,000 plus state initiatives to go towards their property purchase, and if they’re in the under $500,000 market that will offset the costs of stamp duty significantly,” Spencer says.
Suburb spotlight: Brunswick
Brunswick is located just a few kilometres away from the Melbourne CBD. It is a multicultural suburb known for its many cafes and restaurants as well as shops and other amenities. Brunswick residents can get to the CBD easily by tram and train.
A mix of European residents enrich Sydney Road. This makes it a vibrant area that serves European and Middle Eastern cuisines with many different flavors. Lygon Street is also located in Brunswick East. This well-known precinct is anchored in Carlton and continues to Brunswick. You will find authentic restaurants, bars and entertainment venues here in a relaxed setting.
According to the 2006 Census approximately half of Brunswick’s dwellings were freestanding. The remainder consisted of semi-detached and townhouses.
Residex reported that Brunswick’s apartment price rose 4.1% during the three-month period ending September 2008. They also rose by 16.2% over the 12 months ending September.
The median apartment price is now $329,500, with an average rental yield at $270 per week, or 4.27%.
The Brisbane property market is strong and presents great opportunities for investors. The country has a strong economy at all levels that contributes to the highest levels of wage growth.
Despite an evident slow-down in sales activity and price growth, Brisbane is “yet to feel the brunt of the market decline”, according to Paul Smith, marketing director of property research firm Braxton Chase. “If this was a city full of overvalued property, we’d be concerned, but it remains well valued.”
Smith said that even though some suburbs are showing signs of slowing down investors still know where stocks can be found and where high yields can also be found.
LandMark White Research released a report recently that revealed a shift in sentiment about Brisbane’s real estate market. Since 2008 when the market was established, this trend has been evident. The market’s fundamentals are solid, according to the report. This includes low housing stock, limited land supply, continued population growth, and record-low unemployment.[However]Other factors such as affordability, high interest rates, and decreasing consumer sentiment have had a greater impact on the overall market.
Alison Timchur, Colliers International Research Brisbane, believes buyers will return to certain areas if there is evidence of increased property prices. Because there is still not enough supply, buyers will find it hard to find homes.
Timchur says that the past five years have seen strong growth in inner-ring suburbans. This is due to continual high rise development, density and densification of the city and outer ring suburbs. These have attracted buyers who promised large backyards and affordable property.
“However, the current focus on urban renewal will see fringe suburbanites rezoned to allow medium-density development. This will lead to population growth and also price growth in the middle rings suburbs.
Smith believes residential property values will stay stable for the near-term and there may be a rebound in the markets.
Magnetic Island is in the spotlight: Suburb spotlight
Magnetic Island, a small, landlocked community, is poised to expand, according to Di Smee (PRDnationwide Magnetic Island Agent), who believes that Magnetic Island’s development will continue and that prime waterfront properties “only continue to increase in value.”
Smee states that the island’s proximity to major regional CBDs or airports makes it extremely liveable.
“Many people commute to work everyday from the island. Many island property owners hail from Sydney or Melbourne as their tropical paradise lies only 30 minutes from the airport.
Smee stated that over half the island is protected. Accessible only by a 20-minute ferry ride, Townsville.
This ensures that the development won’t “overwhelm” the natural beauty of this area.
“The island has an international reputation as a tropical paradise, and the addition of a world-class harbour in recent years has attracted five-star developments that have lifted the island’s status even higher,” she adds.
According to Paul Powderly (chief executive at Colliers International), the ACT’s property market cooled in 2008’s second quarter. However, this was consistent with the overall slowdown across Australia.
Powderly explains how the slowdown was due to uncertainty in the economy, and not fundamental shifts in ACT’s key drivers.
“Employment levels and household incomes are low. There is a supply/demand balance in the market, which supports current market price.”
Despite the general easing back of sales activity, property prices haven’t fallen significantly in Canberra, easing back less than 1% in the September quarter, and Powderly believes they’ll remain steady in the short term.
He claims that the recent announcements by the federal government will increase the market, and that sales volume should pick up in 2009’s first three quarters.
He also stated that markets are seeking security to protect their nest eggs in the future and that they expect growth in high-quality investor stock.
The top winners in the next 12 months will be from inner-south markets, which produce stock that suits investor profiles.
Derek Whitcombe, Canberra project marketing director for Colliers International, says the slowest sector of the Canberra market is in the $1,000,000–2,000,000 price range, as Baby Boomers are “sitting on their hands” while they wait to see what will happen to their investments in shares.
He stated, “Prior to recent global crises, this market had been leading activity, particularly in high end apartment sales.” They will likely return to the fold once they have been rationalized and accepted.
First homebuyer activity also started to improve “the very day after the government’s announcement in the increase in First Home Owner Grant,” Whitcombe adds.
“Generally, it’s expected that sales in the $300,000–750,000 price range will gradually improve until March 2009, by which time it’s expected that the market will rebound strongly across the board.”
Crace: Suburb spotlight
Crace, located 2.5km west Gungahlin’s Town Centre and 9km north the CBD, will soon be Canberra’s newest suburb.
This project was established to meet the growing demand for housing in the ACT. Over the next six-years, the project will be developed further.
Clare Gilligan, project manager, says the entry road works and start of subdivisions in Crace have begun. The demonstration village, sales office, and first stage of sales releases are set to open in May 2009.
Gilligan said, “Our intent was to create an area where there will be activities and life and that people want to go.”
“The urban core has been inspired by successful urban places such as Leichhardt and Surry Hills in Sydney, and quality, architecturally designed residences will establish the suburb’s character,” she explains.
Once complete, Crace will provide upwards of 1,400 new homes, including a mix of high-density, inner-city-style housing options – many of which will be available for less than $300,000.
Adelaide has positive investment foundations. There is increased economic activity because of various mining projects like Olympic Dam, Prominent Hills, and other large projects.
Paul Smith, Braxton Chase’s Marketing Director, said that even though sales activity has been slowing down, the sharp decline in interest rates, and the increased FHOG incentive, have prompted investors, as well as first-time buyers, to enter the market.
“It’s difficult to get a consistent view of Adelaide’s residential property market,” Smith admits.
“Last year, it was just behind Brisbane as the country’s best performer, and now some commentators are failing to see the excellent underlying fundamentals in the market.”
Although consumer confidence has been dented by local, national and global factors – which have “manifested themselves in higher costs, lower affordability and share market volatility beyond anything most would have ever seen” – good prices are still being achieved, Smith says.
He stated that “canny investors see the intrinsic value and the ever increasing yields. The latter is due to record low rates at 1.5% average vacancy rates.”
Robin Turner, president of The Real Estate Institute of SA believes there is great value to be found in SA’s region market.
Turner claims that rural economies are now recovering after the winter rains. These have increased confidence in regional markets.
“While sales volume is lower than last year, the strength and stability of pricing indicate confidence in regional markets for housing.”
Turner states that both owners-occupiers and investors are attracted to the country SA’s “affordability”, and “good long term prospects”. To take advantage of the increasing employment opportunities, young people are moving to country regions.
Adelaide will also experience a significant rise in FHOG as Adelaide’s median home price is second only to Hobart among all capital cities.
Turner concluded that “There is no doubt that this injection would see more customers enter the market.”
Middleton: Suburb spotlight
Middleton lies centrally between Port Elliot in the Alexandrina District and Goolwa. The suburb is home to miles of picturesque coastlines and surfing spots.
This community lies approximately 65 km from Adelaide CBD. It is within easy reach of wineries, water sports, and whale-watching expeditions in June and September.
Residex reports that September quarter saw a 4.8% increase in house values. This pushed the median house price to $378,000. At 18.3%, capital growth was significant from September to now. This was almost twice the rate at which regional SA growth occurred during the same period.
Alexandrina City Council Mayor Kym McChugh stated that her council is committed to supporting community projects. These include $1.5m in stage 2 upgrades at Airport Road, Middleton as well as $2.2m for conservation projects.
Residex has reported that Perth’s real estate market has been experiencing a cooling trend over the last few months. The three months leading to September 2008 saw unit values fall 1.51%, while house prices were stable.
Real Estate Institute of Western Australia president Rob Druitt believes the local market will begin to lift when the Reserve Bank of Australia’s recent interest rate cuts begin to flow through to consumers, particularly now that first homebuyers have access to more federal grant funding.
Druitt stated that there is a lot of demand for property in the state, with an increase of approximately 1,000 people per week.
To generate interest from people who are “in that hesitant spot”, the FHOG will double and recent reductions in mortgage interest rates will encourage investors to get involved.
Druitt stated that since the boom is over, house prices have declined, interest rates are lower, and there are more homes available, it is reasonable for Druitt to predict that there will still be first-time buyers as well as upgrades.
Paul Smith, Braxton Chas Marketing director, stated that the 15% reduction in stamp duties costs at the state level will increase market stimulus.
He said that the state economy is continuing to improve and that much of the surplus budget has been used for infrastructure projects, such as roads, hospitals, and educational facilities. “This will, in turn, benefit the residential markets – just don’t expect the effects to happen quickly.”
Smith warns against panic selling as a drop in land and house sales “to their lowest point in over 10 years” is not a good sign for a quick turnaround. But Smith states that the fundamentals of Perth’s property market don’t “indicate the need for panic selling”.
According to him, Perth’s best scenario is for prices to remain flat or on par with inflation. He stated, “The truth is that there will be an immediate downward market.”
Boddington: Suburb spotlight
Boddington is a rural community located about 125km from Perth, on the Hotham River. It offers rural living at its best.
Boddington Gold Mine (BGM) has brought life to the small community. It was founded in 1986 and is worth $2.4 billion. In 1986, the original Boddington Gold Mine (BGM), was founded.
This operation employs open-cut mining. Over the next 20-years, it will produce on average 850,000 ounces of gold and 30,000 tonnes of copper per year. Operation began in 2009.
The project is expected that it will bring $550m each year to the Peel economy, and $770m into WA during its operations.
House prices in Boddington have increased 9.93% in the three months to September and 32.42% in the 12 months to September, which reflects the need to accommodate the mine’s 2,000 employees during construction, and 650 permanent employees throughout operation.
Residex reports the median rental yield at $310. This yield rate equates to 3.34% for a median property worth of $483,000.