News
July 2008 Property Market Report
A recent economic forecast indicated action was still required in order to bring levels of inflation back to an acceptable 3 per cent margin. It has been the policy of the Reserve Bank of Australia to increase interest rates in order to combat creeping inflation, so when the Bank met in August, the market was expecting the announcement of yet another interest rate rise. However, not only did the Reserve Bank leave interest rates on hold, Glen Stevens implied that the next rate change could be downward. “With demand slowing, the board’s view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing,” he said. The market responded with a deep long sigh of relief and there was a unanimous feeling that the worst was over. In fact, local interest rate markets are now pricing around a 70 per cent chance of a rate cut by September. This prompted Commonwealth Securities economist Savanth Sebastian to remark: “Any downward pressure on interest rates is likely to see a surge in people looking to buy their first home. The last time interest rates were cut, new home loans jumped by almost 20 per cent in the space of five months.” Correspondingly, the demand for fixed rate home loans fell sharply in June, as borrowers don’t want to be locked into high interest rates when they are near the top of the current interest rate cycle. In other news, the Australian Bureau of Statistics released its June quarter figures revealing Darwin took the prize for the greatest increase in established house prices; it rose 1.9 per cent during the quarter. Perth experienced the most dramatic result falling 2.4 per cent over the same period. Over the past year to June 2008, Perth property prices slipped 0.9 per cent meaning the new median Perth house price now stands at $446,000. There were 17,200 properties on the market in Western Australia in June, down 2 per cent on March, including 2450 blocks of land. It seems that homebuyers are simply tired of waiting and are prepared to enter the market now rather than continue renting. In the June quarter the median weekly rent for houses rose by $10 to $350, while the median unit price rose to $320. This makes Perth’s rental property the third highest in the nation and which might further entice investors back to property. In this current market, many agents will suggest a downward price adjustment to ensure a quick sale. But please, before you take this path, call me and I will explain how I can still produce a swift sale for a premium price.
June 2008 Property Market Report
With the onset of winter, the housing market tends to go into hibernation, but this year is likely to be different. Buyers waiting to profit from the government’s stamp duty cuts are expected to kickstart the winter property market from the first of july.
There is likely to be a flurry of activity from these patient buyers, but no-one can predict with certainty what this will look like. Looking back to the mortgage front, there are indications that a buying spree is likely.
Early in the year, there was a rush to lock in fixed-rate mortgages. This activity has subsided from a high of 25 per cent in February to a low of 13.7 per cent in May. Fixed rate mortgages tend to be popular in uncertain economic conditions, so if the reverse occurs it is a good sign that homeowners are feeling more confident.
This suggestion is confirmed by a recent survey of homeowners that found two thirds of borrowers across Australia are easily meeting repayments on their home loans despite all the recent interest rate increases.
On the national level, a little over a third of all mortgages went to refinance purposes. This figure is down slightly from the peak of 38.42 per cent in February 2008, and so it seems homeowners are taking positive action to withstand any financial turbulence caused by unsettling market conditions.
It is interesting to note that the number of mortgages taken out by Western Australian property investors still represents a significant portion of the finance market. At 39 per cent, 6.2 per cent above the national average, investors still have an eye toward property as a key means of increasing wealth.
A salary review conducted by the Australian Institute of Management surveyed 723 private and publicly listed companies around the country and found the highest wage increases were in Western Australia, peaking at 6.4 per cent.
At the same time, employment growth moved ahead, continually powered by the commodity boom, adding jobs and pushing down the jobless rate. This continual upward momentum means that the current median house price in Perth remains constant at $460,000.
The good news for investors is that figures from the Australian Bureau of Statistics show a significant decline in the number of new building approvals. With a limited supply of housing, we can expect to see continued upward pressure in the rental market. Prices are expected to increase by as much as 20 per cent.
If you would like a confidential appointment to discuss your real estate matters, please call me at the office and I will show you the range of exciting options I have available for clients wanting to take advantage of this current market.
With warm winter greetings!
March 2008 Property Market Report
Are you feeling the pinch? The effect of this latest interest rate rise is being felt by hundreds of thousands of Australians with a mortgage – and it isn’t getting any easier for renters either.
Research commissioned by the Federal Government indicated more than one million Australians were suffering housing stress - spending more than 30 per cent of their gross income on either rent or mortgages.
In order to relieve some of this pressure, the Federal Labor Government has initiated a National Rental Affordability Scheme and will fund tax incentives for investors to build up to 100,000 low-cost rental properties.
If you’re considering an investment property, the scheme provides tax credits of $6,000 a year for 10 years for new properties that are rented at 20 per cent below the market rate. This will cut the rent on a new, average three bedroom unit from $350 to $280 a week.
Westpac Bank recently released its Property Outlook predicting that 2008 will be similar to 2007. Flat! There is however the possibility that the combination of strong economic growth and high population growth will lead to renewed price growth. This is an optimistic viewpoint, but still a possibility.
In the mean time, the median house price in Perth currently sits at $465,000. Further reports from the Property Outlook showed an increase of 55 per cent in the number of properties for sale and there is a caution here for homesellers - the time it takes to sell a property is the longest it’s been since the mid 1990s.
There has also been a slowdown in new dwelling approvals to just 23,048, a drop of 14 per cent in 2007, indicating an undersupply of housing based on current population growth figures. This will undoubtedly affect the rental market which it predicts will increase by 10 per cent this year.
It is expected that rental increases will lift yields to 4.4 per cent and although this would normally encourage first homebuyers into the market the sustained climb in interest rates will possibly offset this impact.
Don’t forget, preparation is the key to a successful sale; there is a lot you can do to make sure your home sells quickly and profitably. If you need to sell quickly, I have a unique system to make sure you also get the best price. Call me at the office to find out more.
May all your plans be fruitful,
February 2008 Property Market Report
You could tell things were serious when 17 out of 19 economists agreed on the same thing – unfortunately, it was that interest rates would rise in February.
The latest rate rise of a quarter of a per cent makes it the eleventh since 2002. Fearing that this rise would eventuate saw a record number of homeowners refinance their mortgage in an attempt to arrange a better deal.
The Australian Finance Group’s Mortgage Index for January shows that a little over 37 per cent of mortgages arranged by brokers in January were for refinancing rather than for property purchases.
Consumers are taking action to make sure they can deal with future rate rises. At the same time, the Mortgage Index shows 24.3 per cent of buyers raced to fix their mortgage rate in a bid to counter the negative effects of further mortgage stress.
There is no doubt the cost of repaying loans has risen, but the number of homes being sold through default or bankruptcy, is low. In good old Aussie fashion, we are doing everything possible to keep our homes.
Nevertheless, this might change if the Reserve Bank decides on a second increase in the coming months. From all reports, it is a good idea to factor a second interest rate rise of 0.25 per cent into the equation. It is better to be safe than sorry.
If the worst-case scenario does eventuate and you are forced to sell your home, you need to be aware that the average time it takes to sell a property and the amount a homeseller is willing to reduce their listing price, are increasing.
Now that the market is more difficult, some agents will suggest a downward price adjustment to ensure a quick sale. Before you take this path, please call me and I will explain how I can still produce a swift sale for a premium price.
But don’t worry; it’s not all doom and gloom. Figures from the Australian Bureau of Statistics showed Perth is still moving ahead. The average house price rose 1.1 per cent in the December quarter.
Some might consider this a small advance, but considering the blight that hit Sydney after its period of growth, Perth is doing remarkably well. The fundamentals are still sound! Interestingly, Adelaide recorded the highest increase of 6 per cent growth.
As always, a property that is priced right, beautifully presented and professionally marketed will sell in any climate. If you need to sell quickly, I have a unique system to make sure you also get the best price. Call me at the office to find out more.
May all your plans be fruitful,
January 2008 Property Market Report
It seems the more our city loses its “Dullesville” tag, the busier it gets and the harder we have to work. For those of you still kicking back and enjoying the summer holidays, two words spring to mind – lucky bugger!
Ask the people of Perth how the real estate market will perform this year and you’ll get a variety of different answers. The problem is, the media runs as diverse a range of commentary as do the people on the street – so much for an informed opinion.
There has been a lot of negative talk about the Perth residential property market mainly centring on the idea that the boom was exaggerated and that house prices are too high. Those in this camp predict prices will slip to bring back a balance in 2008.
A reasonably reliable source, and one that runs counter to many of the reports coming from the eastern states, is the ANZ Australian Property Outlook. The latest edition, released in early January, argues that Perth is set for a good year.
In the light of recent stock market instability, the ANZ report observes, “residential property has delivered vastly superior returns to all other broad asset classes.”
There is however a warning, “Affordability conditions for new home-buyers will deteriorate further unless appropriate policy action is taken. A dramatic tightening of the housing market will force house prices and rents sharply higher.”
General economic conditions in Western Australian remain the strongest in the country. The commodities boom is still causing significant economic momentum and is the single greatest contributor to our state’s real gross income, providing an annual increase of around 12 per cent.
The Outlook suggests this strong economic environment will maintain a floor under the WA property market and despite widespread doomsday commentary will avert a significant correction.
Interestingly, the Australian Finance Group has just reported WA has the lowest Loan Value Ratio (LVR), the value of home loans expressed as a percentage of the value of properties, in the country.
The average LVR nationally fell to 62.8 per cent; in comparison, the average WA LVR came in at 49.9 per cent - an average home loan of only half the value of the property. If you would like to put this equity to work, please call me at the office.
Or, if you are settled comfortably, but would be interested in knowing exactly what your home is worth in this rapidly changing economic climate, please call and register for my premium property report.
December's Property Market Report
Whether you’re still firing on all cylinders or limping over the line, battle worn and weary, I’d like to take this opportunity to wish you a very merry Christmas and a restful New Year.
“Steady as she goes,” is the cry of most analysts in the run up to Christmas. However, with the national economy following the lead of Western Australia, growth seems to be the rallying cry of governments and investors alike.
With growth of 4.4 per cent recorded in the last financial year, many economists believe we will have at least a further two years with a strong national economy and that the outcome of the election will have little or no influence in the short term.
In Perth, housing market fundamentals are sound and economic conditions favourable providing a solid underpinning to housing market outcomes over the medium term.
The continued expansion of the mining sector and the flow on effect that this is having on business is further strengthening the WA economy. Combine this with low unemployment and the result is more and more people purchasing a second property for investment purposes.
Perth now has more residential property investors than any other capital city in Australia, according to figures released by the Australian Finance Group. Per capita, Perth has nearly twice the number of real estate investors than Adelaide, 15 per cent more than Melbourne and 11 per cent more than Sydney.
Although the last run of interest rate rises left some owners experiencing ‘mortgage stress’, these figures indicate there is still a significant portion of Perth homeowners capitalising on the number of options they have within the Perth property market.
The flow on effect has seen some easing in rental vacancies. The vacancy rate for the September quarter increased to 3.4 per cent, meaning there is more choice for renters and less demand on available stock. This is likely to keep rental prices from spiralling out of control.
Housing affordability is at a 22 year low, but with the levelling off in established home prices and still above average income growth, affordability should improve marginally over the course of 2008.
Considering this sweeping view of the market, if you have been contemplating a real estate change, whether you want to downsize, relocate or invest your equity, it would be my great pleasure to assist you with all your property needs.
The inevitable happened. The Reserve Bank confirmed fears that it would lift interest rates this month announcing a rise of .25 per cent. The new base rate is 6.75 per cent and is the tenth increase since February 2001.
Expect a feeding frenzy from banks and mortgage brokers. Fixed term loans and fancy refinancing options will be the bait. Just keep in mind when you fix an interest rate after the horse has bolted, you’re taking a bet against the banks – and there’s usually only one winner in this two horse race.
In other news, figures recently released by the Australian Bureau of Statistics show the price index for established houses in the capital cities increased 3.5 per cent in the September quarter compared with a rise of 3.7 per cent in the June quarter of 2007.
In Perth, house prices rose 1.1% over the quarter and 2.8% for the year to September 2007. This is a rather lack lustre showing compared to Brisbane and Melbourne (18.1 & 17.8% respectively).
Nevertheless, after the height of its boom in 2003 Brisbane reacted the same way Perth is now. After levelling off for a short period, the Brisbane market has taken off again and is outperforming the rest of the nation. If Perth continues to follow Brisbane’s lead, this coming year will be one to watch.
According to Lino Iacomella of the Property Council of Australia, claims that Perth’s housing market is facing a significant correction are exaggerated and lack an understanding of how the property market works in Western Australia.
Mr Iacomella said reports projecting a significant weakening in the housing market are further examples of external commentators failing to understand the underlying strength of Western Australia’s economy.
Mr Iacomella further argued that property values have risen in Western Australia in recent years because of housing shortages in key sectors, land supply constraints in high demand locations, a surge in high income households seeking secure long-term property investments and high levels of consumer confidence in Western Australia’s long-term economic prospects.
All of these factors are still operating in W.A. and will continue to sustain the housing market into the future. This makes it an exciting time to live in Perth and if you have an interest in real estate, there is a lot to keep an eye on.