63 posts tagged “prediction”

"HOUSING prices around the country rose nearly 2 per cent in August, the biggest monthly increase since researcher RP Data-Rismark began its tracking in 2005.

The August increase takes housing value growth to 7.9 per cent for the first eight months of the year, with Melbourne turning in the best performance -- an 11.6 per cent jump. ...

In a note yesterday, Mr Walters said an expected 25 basis-point interest rate rise next week, tighter lending standards, the Commonwealth Bank's move this week to lift its fixed mortgage rate, and the winding down of the first-home owner grant would all affect new development.

David Devine, managing director of Queensland-based residential developer Devine, said it was nearly impossible to secure funding from the banks for apartment and unit projects, irrespective of pre-sales.

Mr Devine said figures from researcher BIS Shrapnel showed there was demand for 175,000 new homes nationally each year."

The Australian

"Unit values marginally outperformed house values in August, with units rising 2.1 per cent while houses gained 1.8 per cent."   Source

See also, RP Data blog

See Podcast

• What will happen to the inner city Brisbane apartment market if foreign students stop coming to Brisbane?
• When interest rates rise, will Brisbane apartment prices fall?
• Will Meriton build a building in Brisbane that is lesser quality than Devine?  Is that possible?
• When will Felix have its river views blocked by development?
• Will returns to owners in Oaks buildings decrease this year?
• Will apartment prices in Brisbane continue to fall into 2010?
• When first home owners stop buying, will sellers who have not sold become desperate?
• Are the only investors buying at present the vultures and bottom-feeders?
  

A good property Blog, written by Chris Joye from Rismark.

"Colliers International’s Investor Sentiment Survey reveals bottom of property cycle now imminent with upswing
predicted to be well underway by 2010.  Property investors around the country believe Australia is now approaching the upswing point of the property cycle with the majority of investors believing the industry is currently between 4:00 and 6:00 on the property cycle clock (where 6:00 is considered bottom). This was the major finding of the inaugural National Investor Sentiment Survey conducted by Colliers International.  Colliers International surveyed institutional and private clients across Australia to attain their sentiment on the current climate of Australia’s property market, and their views on the next 12 months. The investment calibre of respondents was exceptionally high with 42 percent stating the value of their portfolio was greater than $AUD1 billion.  Felice Spark, Director of Commercial Research at Colliers International says the majority of investors believe we are now fast approaching, if not already at the bottom of the cycle, poised for upswing. “36 percent of investors surveyed believe Australia is currently at 5:00 on the property clock with a further 36 percent identifying either 4:00 or 6:00.”
Summary of key findings:
• 72% of investors believe we are between 4:00 and 6:00 on the Property Cycle Clock, poised for upswing
• Residential sector is the standout with values holding steady or possibly growing
• 63% said they were looking to buy property in Australia within the next 12 months"
Source:  Colliers
So based on this survey, more than 60% of property investors think that things are going to get worse before they get better.

"The Sydney market didn't grow at the same rate as other markets during the economic boom. "People simply could not afford to bid up the prices of the asset to the same extent as they could in other markets," Residex says. "They have sought out the affordable asset, units."

Sydney points to the future, Residex reckons, as markets for each capital city reach their limit of affordability, which is the main driver of price growth.

Will units continue to be a more affordable option? Not unless it becomes easier to build them. Analyst Michael Matusik says multi-unit building approvals fell 44 per cent in May and, while the data is volatile, medium-density dwelling starts are on "a serious slide south". This is despite lower interest rates, the economic stimulus and rising investor interest.

Matusik says high prices and restrictive buyer and developer finance are the limiting factors. A new apartment in a downtown city area (Matusik lives in Queensland) costs the buyer at least $8000 a square metre, putting the cost of a 69sqm two-bedroom apartment with one parking space at $550,000.

Investors buy close to 75 per cent of all new apartments, but they now need bigger deposits to do so. Twenty per cent is often the minimum and sometimes 25per cent to 30 per cent.

Growth in rents is also slowing and Matusik says he can't see investors rushing back into the new apartment market. He says most new units sold recently have been substantially discounted, often below replacement cost.

Some are also not that new in the sense they have been on the market for a long time"

The Australian

"There are a number of key reasons why we are optimistic on house prices. These include low mortgage rates, the first-home buyers’ grant, relatively low vacancy rates and the sharp improvement in housing affordability.  But there are also the important demographic fundamentals that should facilitate a lift in house prices over the medium term. These demographics include strong population growth. Population growth has accelerated to be at its highest level in 40 years.  It is running at this pace at a time when there’s a national shortage of housing and when increasing housing construction is being restrained by difficulty in accessing funding and uncertainty about the economic and financial outlook. This shortage is set to get bigger over the next few years.  This imbalance between demand and supply means prices should stabilise later this year and early next year, before price pressures emerge and gradually intensify over the next few years.  In the short term, further falls in house prices are still likely. Most recent house price measures are still showing declines. These are most pronounced at the top end of the market."

Short term fall, long term rise.

"Instead, many prefer the cheaper priced units and apartments, which also often are closer to the CBD. The affordability is especially a growing factor this year, as that section of the market has become the dominant force in the property market. ...  With the growing market share, units have also shown a stronger capital growth than houses in nearly every capital of the country. In Sydney, Brisbane and Canberra, units showed positive 12 month growth in median value up to February this year, compared to negative growth for house median values. ...
Another key is to make sure there is a parking spot included, something that can make a huge difference in demand, especially if the unit is in an area with few street parking opportunities. “No matter where you buy an apartment, never ever buy it without allocated parking,” says Wakelin.

What not to buy

There are, however, areas where demand is not so strong. For one, stay away from high-rise apartments, particularly in areas of overdevelopment such as the Gold Coast, the Sydney CBD or the Docklands in Melbourne, say experts.

“We find for investment purposes, high-rise apartments do not work,” says Wakelin. “They are very generic, so there’s little scarcity value with them.” Ryder agrees, saying investors should not be swayed by the magnificent views from atop beachfront high-rises in the Gold Coast. Investors should remember they won’t be living in these properties, and in the long run, they don’t show as much capital growth.

“There’s a lot of glamour in buying a high rise, but history shows it’s generally a poor investment,” says Ryder. “Put aside the emotions, and just look at the sums. You’re better off not buying something with an ocean view like in Surfer’s Paradise.”

He also says buying a used apartment is better than buying a brand new one.

“There’s a huge price differential with a new product and equivalent second-hand product,” says Ryder. “That’s simply because the cost of development is so high. The research shows there’s commonly a price difference between 30-40% between new and old apartments.”

That ultimately means for an investor that it’s harder to get capital growth out of a newer product. It might look nicer, but it will cost you in the long run. There’s also little scarcity in some areas for new product, such as the Gold Coast, where new apartments have been built without abandon. And once its no longer new, you actually lose that tag and that value.

“There’s a lot of risk in committing to buy something now and paying two years later, whereas the market can go in the wrong direction in that time,” says Ryder. “Plus developers tend to build that (expected value growth) into today’s prices these days.”

REA

"Of course it's not good news at the top of the market, but despite all the attention given to Mosman, Toorak, Peppermint Grove and Noosa, that's only a small fraction of total Australian housing and doesn't matter very much in the overall economic scheme of things."

The Age

"Residex is now confident that the property market will not crash as it did in the USA and UK. In fact, some areas are about to experience good future capital growth..."