The Australian government to invest up to A$8 billion to support residential lending

The Australian government gave a formal green light on Monday to a proposal to invest up to A$8 billion ($7.35 billion) in additional public funds to support the country’s residential mortgage-backed bond market.

“This investment is an important part of the government’s commitment to strong and effective competition in Australia’s mortgage market,” Treasurer Wayne Swan said in a statement.

The market for residential mortgage-based securities all but collapsed during the global financial crisis and is being nursed back to health by the government, which wants to encourage non-bank lenders that rely heavily on this market for funding.

Australia leader in global housing market recovery

While housing markets in the world’s leading economies embark on the slow road to recovery, Australia has emerged one of the top performers.

Of 27 countries Australia’s housing market recovery was the second best performer on a global basis, with house priciest climbing 4.9 per cent since the third quarter last year, according to Global Property Guides.

Darwin had the highest price increase among Australia’s eight capital cities, followed by Melbourne and Canberra, with the upsurge partly fuelled by a genuine housing supply shortage.

Israel was the top performer, with house prices rising 10.2 per cent over the same period.

New Zealand experienced a more modest increase of 2.0 per cent.

Despite growth in some markets, more countries experienced house price falls (17 countries) than increases (10).

Lowest performers included Latvia (-59.7 per cent year to date), the UAE (-48.1 per cent), Bulgaria (-28.7 per cent), Iceland (-21.2 per cent), Russia (-19.5 per cent) and Slovakia (-15.3 per cent).

The global economy has resumed growth and dwelling prices in Australia have risen significantly this year.

At its meeting today, the Reserve Bank of Australia (RBA) Board decided to raise the cash rate by 25 basis points to 3.75 per cent, effective 2 December 2009.

Statement by Glenn Stevens, Governor Monetary Policy RBA

The global economy has resumed growth. With economic policies remaining expansionary, growth is likely to continue next year, though it will probably be modest in the major countries, due to the continuing legacy of the financial crisis. In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010. Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up.

In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery. The effects of the early stages of the fiscal stimulus on consumer demand are fading, but public infrastructure spending is starting to provide more impetus to demand. Prospects for ongoing expansion of private demand, including business investment, have been strengthening. There have been some early signs of an improvement in labour market conditions. The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.

Inflation has declined from its peak last year, helped by the fall in commodity prices at the end of 2008 and a noticeable slowing in private-sector labour costs during 2009. In underlying terms, inflation should continue to moderate in the near term, though it will probably not fall as far as thought likely six months ago. Headline CPI inflation on a year-ended basis has been unusually low because of temporary factors, and will probably rise somewhat over the coming year. Both CPI and underlying inflation are expected to be consistent with the target in 2010. The rise in the exchange rate during this year will have some impact in containing prices for traded goods and services in the period ahead, and will dampen growth in the trade-exposed sector of the economy.

Credit for housing is expanding at a solid pace, and dwelling prices have risen significantly this year. Business credit has fallen, as companies have reduced leverage in an environment of tighter lending standards, and as some lenders have scaled back their balance sheets. The decline in credit has been concentrated among large firms, which generally have had good access to equity capital and, more recently, to debt markets. Share markets have recovered significant ground, which, together with higher dwelling prices, has meant a noticeable recovery in household wealth.

The Board’s assessment of the outlook remains much as in the November Statement on Monetary Policy. Growth in 2010 is likely to be close to trend and inflation close to target.

With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. These material adjustments to the stance of monetary policy will, in the Board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.

Prices set to surge as more Australians plan to invest in property

More than a third of Australians plan to buy a property over the next two years despite worries over rising interest rates a new survey had shown.

The Mortgage Choice Consumer Sentiment Survey also found that more than two in five plan on buying an investment property. More than half (57%) believe the recent global financial crisis had made investing in property seem safer than shares.

“As we all know now, the Australian housing market has emerged from the financial crises relatively unscathed compared to its global counterparts,”

ACCORDING to the property clock

ACCORDING to the property clock, the best time to buy is at the bottom, 6 o’clock, just after the oversupply has hit and properties are at a discount to their underlying value.

And either side of 6 o’clock is generally considered bargain time. Of course, the opposite is true for sellers.

The top of the market, or 12 o’clock, is the best time to sell, when prices are at their peak. And either side of midnight is still okay.

So what’s the time in your market right now?

South Australia - 7 o’clock

“Private Residential Building Approvals experienced 80% growth over the year of 2006. The global financial crisis was more of a glitch in the system to SA, driven by a reduction of confidence from the worldwide lack of lending and tightening of loan criteria. Which seems to now be on the mend.

The manufacturing industry plays a very important role in South Australia’s economy, generating 15% of the state’s Gross State Product (GSP) and playing a large part in exports. The manufacturing industry consists of automotive (44% of total Australian production, 2006) and component manufacturing, pharmaceuticals, defence technology (2.1% of GSP, 2002-2003) and electronic systems (3.0% of GSP in 2006). South Australia’s economy relies on exports more than any other state in Australia.

Production of South Australian food and drink (including agriculture, horticulture, aquaculture, fisheries and manufacturing) is a $10 billion industry.

South Australia’s economy includes the following major industries: meat and meat preparations, wheat, wine, wool and sheepskins, machinery, metal and metal manufactures, fish and crustaceans, road vehicles and parts, and petroleum products. Other industries, such as education and defence technology, are of a major growing importance.

South Australia possesses the world’s single largest known deposit of uranium, at the Olympic Dam mine. Olympic Dam contains 40% of the world’s known uranium reserves. The Olympic Dam mine is also the world’s fourth largest remaining copper deposit, and the world’s fifth largest gold deposit.”

To find out why and where the rest of the country is on the clock then register for our final Property Investment Event for 2009. 

 

Independent studies have shown that the majority of property investors consider research to be the most important factor when considering buying an investment property. The next most important thing they wanted is someone to be able to help them with the processes to save time, answer their questions and avoid making the wrong decisions.

 

With so much activity going on, it’s no wonder everyday people do not have the time to do their own research thoroughly or even to attempt renovating risky and costly fixer uppers. Hence why they either get poorer results, or worse still, do nothing.

 

Below are seven fantastic properties. They all have high yields in great areas that are cash flow positive or near too with good capital growth prospects.

 

Whatever your investment strategy, one of the opportunities below will be a great way to start or an addition to your portfolio. 

 

SA, Adelaide Student Accommodation  -  from: $199,500

Type: Student Accommodation Gross Yield: 7.3% pa Incentives: 5% net guarantee till Dec 2010   Completion: Now Enquire NOW

---

SA, Kurralta Park -  from: $460,000

Type: Townhouses Gross Yield: 5.17% pa Incentives: Free property management and maintenance first 12 months Completion: Mid 2010 Enquire NOW

---

SA, Elizabeth Park - $270,000

Type: Townhouse Gross Yield: 5.34% Internal Sizes: 156sqm – 180sqm Completion: Jan  2010 Enquire NOW

---

QLD, Cairns - from: $322,000

Type: Apartment Gross Yield: 5.02 % Incentives: $2,000 cash back. Limited time only. Completion: Early – Mid 2011 Enquire NOW

---

SA, Brompton - from: $349,000 – $469,000

Type: Apartment Gross Yield: 4.95% – 5.38% Internal Sizes: 87sqm – 112sqm Incentives: 12 month rental guarantee Completion: March 2011 Enquire NOW

---

QLD, Marsden  -  $390,000 – $405,000

Type: House & Land Package Gross Yield: 4.95% – 5.38% Land Sizes: 470sqm – 640sqm Building Sizes: 200sqm approx Enquire NOW

---

QLD, Collingwood Park  – From $354,000

Type: House & Land Package Gross Yield: 5.1% Land Sizes: 375sqm – 900sqm Building Sizes: 170sqm approx Enquire NOW

---

RLA: 221406 

State & territory economic rankings

State of the States

•    Across all the states and territories, Tasmania currently has the best performing economy in Australia.
•    CommSec has assessed the performance of each state and territory economy on eight key indicators. It is clear that smaller economies have weathered the global slowdown the best, followed by the resources states of Western Australia and Queensland. NSW brings up the rear, hardest hit by the global financial crisis.
 
Economic Rankings

October 2009
1. Tasmania
2. South Australia
3. Western Australia
4. Queensland
5. ACT
6. Northern Territory
7. Victoria
8. NSW
 
Tasmania on top, NSW brings up the rear

•    Tasmania probably wouldn’t be the state that most people think of when it comes to nominating the best performing economy in Australia. But Tasmania was constantly near the top of the leader-board when assessed across eight key indicators. Certainly Tasmania has been less affected than other state and territory economies by the global financial crisis and global recession. But affordable house prices and firmer population growth have also certainly boosted the performance of the Tasmanian economy.

•    Second on the leader-board is South Australia. And again it makes sense as the state has a relatively small financial sector and has been less affected by the slowdown in the global economy.
•    The resources states of Western Australia and Queensland come next. Western Australia has experienced a significant slowdown in the housing market after stellar gains in 2006 and 2007. And while Queensland is still experiencing high population growth, the gap with other states has been narrowed, affecting housing construction.
•    ACT is in fifth spot with middle rankings on most indicators. The Northern Territory finished sixth, with a downturn in investment affecting economic growth while under-performing in housing activity and population growth.
•    Victoria and NSW are seventh and eighth respectively in the economic rankings, affected by the fact they have larger financial sectors than other states and territories. Job market performance has lagged other states, affecting retail spending and general economic growth.
•    However looking ahead, the resources states look to have the best prospects with the global economy reviving, especially China. NSW should be able to lift from bottom place as the housing market recovers.

How were the rankings decided?

•    Each of the states and territories were assessed on eight key indicators: economic growth; retail spending; business investment; construction work done; population growth; housing finance; dwelling commencements; and unemployment.
•    The economies weren’t ranked on annual growth rates; rather current activity levels were compared with decade averages. Clearly some states such as Queensland and Western Australia consistently have faster growth rates due to historically faster population growth. So the best way to assess economic performance is to look at each indicator in relation to what would be considered ‘normal’ for that state or territory.
•    For instance, Tasmania’s trend unemployment rate stands at 5 per cent. While the Northern Territory has lower unemployment, Tasmania’s decade average unemployment rate stands at 6.9 per cent. Compared with other states and territories, Tasmania’s job market is performing far better, with unemployment well below its ‘normal’ or decade average rate.
•    Similarly dwelling starts. In the June quarter Tasmania’s dwelling starts were almost 6 per cent lower than a year ago. But the actual level of starts was almost 18 per cent above the decade average – far better than the performance of any other state or territory on the same criteria.
•    Clearly there will always be some subjectivity associated with the rankings. Some people may believe that a certain indicator deserves a higher weight – perhaps considering that unemployment is more important than housing finance. And some will debate the worth of indicators used for assessment. But the fact that eight indicators are used means economic performance is broadly assessed.
•    Where available, trend measures of the economic indicators were used to assess performance rather than more volatile seasonally adjusted or original estimates.

Economic growth

•    Ideally gross state product would be used to assess broad economic growth. But the data isn’t available quarterly. Rather state final demand (household and business spending) was added to exports less imports.
•    Western Australia came out on top with economic activity in the June quarter almost 30 per cent above the state’s decade average level of output. Next strongest was the other resources-driven state, Queensland. While economic growth in the two states has slowed over the past year as companies decided to mothball new projects, actual activity levels are still well above levels considered ‘normal’ over the past decade.
•    NSW was ranked eighth on economic growth with current economic activity just 11 per cent above its decade-average growth pace. Higher unemployment has led to weak retail spending, construction activity and business investment.

Retail trade

•    The measure used was real (inflation-adjusted) retail trade in trend terms with June quarter data the latest available. Monthly retail trade was also assessed (August data available) but broad results didn’t vary greatly.
•    Coming out on top was Northern Territory with spending in the June quarter 32 per cent above decade average levels. Low unemployment, rising incomes and solid housing activity are key drivers of consumer spending. Queensland was next strongest followed by Tasmania,
•    At the bottom of the leader-board was the ACT and NSW with both economies held back by weak construction activity. For NSW both residential and engineering construction have been weak compared with past experience while ACT has been constrained especially by sluggish business spending.

Business investment

•    The resources-dependent states of Western Australia and Queensland lead the business investment leader-board. While growth in investment has slowed in both states, it remains positive, lifting the substantial amount of work underway.
•    In Western Australia, the amount of private capital expenditure in the June quarter was a stunning 115 per cent above the average levels of the past decade. In Queensland business investment is 72 per cent above ‘normal’ levels. Simply, there is a lot of work to be done.
•    Victoria was in third spot in capex, with activity 42 per cent above the long-term average. In both Western Australia and Victoria, business investment was at record highs in trend terms in the June quarter.
•    Despite the global slowdown, capex in all states and territories is above the long-term average except in Northern Territory. The Territory seems to have paid the highest price for the global slowdown with business investment 27 per cent below the average levels experienced over the past decade.

Unemployment

•    The smaller states and territories are the major winners in the job stakes. Tasmania leads the way from the Northern Territory and the ACT. In Tasmania the trend rate of unemployment stands at just 5 per cent, well below the 6.9 per cent average level recorded over the past decade.
•    Lower housing prices and a cheaper standard of living have led to a boost in population growth, stimulating housing activity and creating jobs.
•    In Northern Territory the trend unemployment rate of 4.2 per cent is below the decade average of just over 5 per cent. And in the ACT the unemployment rate stands at 3.5 per cent, below the 3.7 per cent average over the past decade.
•    Another of the smaller states, South Australia, is fourth on the unemployment leader-board; its 5.7 per cent unemployment rate is below the 6.0 per cent decade average.
•    At the bottom of the pack is Western Australia, its unemployment rate lifting from sensational lows over the past year with the global recession and wind-back in mining activity. The trend rate of unemployment in Western Australia stands at 5.7 per cent, below the 5.0 per cent average rate record over the past ten years.
•    Encouragingly in the past month the trend rate of unemployment fell in the large states of NSW and Victoria as well as the ACT. The only increases in unemployment were experienced in the resources-dependent states of Queensland and Western Australia.

Construction work

•    The measure used for analysis was the total amount of residential, commercial and building work actually completed in trend terms in the June quarter.
•    Despite a slowdown in the residential sector, Western Australia leads all other states and territories when it comes to measuring construction activity compared with longer-term averages. In Western Australia the amount of construction work done in the June quarter was 80 per cent above the decade-average. And importantly activity is still growing, lifting 6 per cent over the past year.
•    Behind Western Australia in second spot is the Northern Territory. The Territory may have seen a slowdown in new business investment but construction is still strong, boosted in part by ‘lumpy’ large-scale projects. Construction work is 60 per cent above decade-averages and work done is up 44 per cent on a year ago – the fastest pace in the nation.
•    South Australia is in third place on construction work followed by Queensland. But while work in South Australia is up 22 per cent on a year ago, Queensland work is down 3 per cent.
•    Weakest construction work is in NSW with work done in the June quarter just 9 per cent above long-term averages. In trend terms construction work has also actually gone backwards for the past two quarters.

Population growth

•    Across the states and territories the current annual rate of population growth was compared with each economy’s decade-average growth pace.
•    Population growth is fastest in Western Australia (3.1 per cent) followed by Queensland (2.6 per cent). But both states have been consistently leading the rest of the nation, especially over the past three years.
•    But top ranking on the population growth leader board is Tasmania. In Tasmania annual population growth stands at 1.0 per cent, the fastest in four years and well above the decade average pace of 0.6 per cent. Next best was Western Australia with its population growth of 3.1 per cent, well above its long-term average pace of 1.8 per cent. 
•    Somewhat surprisingly NSW was in third spot on population as current annual growth of 1.6 per cent compares with the decade average of 1.0 per cent. In fact as recently as five years ago, population growth was almost a third of current levels at 0.6 per cent.
•    At the bottom of the leader-board – and again somewhat surprisingly – is Queensland. Current population growth of 2.6 per cent is only modestly above the ‘normal’ or decade-average growth pace of 2.3 per cent.
•    In other words Queensland is not getting the same boost to its overall economic performance from the change in population growth.

Housing finance

•    The measure used was the trend number of housing finance commitments and this was compared with the decade-average for each respective state and territory. Housing finance is not just a lead indicator for real estate activity and housing construction but also is an indicator of activity in the financial sector. Unfortunately trend figures on commercial, personal and lease finance are not available for states and territories.
•    In top position for housing finance is the ACT. In the past nine months the number of housing finance commitments have accelerated sharply and now stand 35 per cent higher than a year ago. But more importantly the number of commitments is 36 per cent above ‘normal’ or decade-averages, boosting work for financial institutions, real estate agents and builders.
•    South Australia is in second spot for housing finance, with the number of commitments 21 per cent above longer-term averages, particularly driving overall activity in the construction sector, especially in the residential sector.
•    Victoria was third on housing finance followed by Queensland. And Queensland is quickly moving up the leader-board with housing finance lifting 37 per cent over the past year – the fastest growth in the nation – ahead of the ACT and NSW.
•    At the bottom of the leader-board is Western Australia. While housing finance is again growing in annual terms, it consistently fell over 2007 and 2008. As a result, the number of housing finance commitments is just 2 per cent above the decade-average or ‘normal’ growth pace.
•    Tasmania was in seventh position on housing finance, just behind the Northern Territory.

Dwelling starts

•    The measure used was the trend number of dwelling commencements (starts) with the comparison made with the decade-average level of starts. Starts are driven in part by population growth and housing finance and can affect retail trade, unemployment and overall economic growth. However the level of over or under-building in previous years can determine the level of starts.
•    But while Tasmania was at the bottom of the leader-board on housing finance, it tops the leader-board on dwelling starts. The number of dwelling starts in the June quarter was 18 per cent above the decade average although the historically high activity levels have retreated in the past nine months. In fact dwelling starts in the June quarter were down 6 per cent on a year earlier.
•    Low unemployment and firmer population growth have driven the demand for new housing in Tasmania, also supporting retail spending. It is clear therefore that an economy doesn’t need a strong resources sector to drive economic performance. But it does need a driver, such as population growth.
•    In second spot for dwelling starts is South Australia. While the trend number of starts has eased over the past nine months, it has been from 24-year highs. Trend dwelling starts in South Australia are currently 4 per cent higher than decade averages.
•    The Northern Territory and ACT are in third and fourth spots and both have dwelling starts slightly above longer-term averages.
•    At the other end of the leader-board is NSW. Dwelling starts in NSW over 2008/09 fell to the lowest levels in 56 years. In the June quarter the number of dwelling starts was 43 per cent below the decade average. And starts were 27 per cent down on a year ago. Clearly the NSW residential construction sector is depressed. But firmer population growth and low interest rates should drive recovery in coming months.
•    Behind NSW in seventh spot is Queensland. While the number of starts in the June quarter was above NSW, it was still 38 per cent below the average levels seen over the past decade. The downturn in the resources sector and the reduced boost from population growth has translated into higher unemployment and a downturn in home building.

Other indicators

•    Consumers in all states and territories are currently enjoying real wage gains (wages growing faster than prices). And homeowners are benefiting from rising home prices.
•    While Western Australia is experiencing the strongest gain in real wages, house prices are rising only modestly. Figures from RP Data indicate that Perth dwelling prices are up just 1.8 per cent on a year ago.
•    Victoria is arguably in the strongest position with real wage growth of 2.8 percentage points and home prices up almost 18 per cent on a year ago.

What are the implications for investors?

•    The leader-board of state and territory economies is useful to get a big picture perspective. And certainly the current ranking does make a lot of sense. Tasmania has been more insulated from the global financial crisis and global recession than other state economies. NSW has a more significant financial sector than other states while Western Australia, Queensland, and the Northern Territory have been negatively affected by slower activity in the resources sector.
•    Looking ahead, Tasmania will continue to be supported by above-average population growth but activity in the housing sector is already beginning to ease after strong construction activity over the past year.
•    Western and Queensland can be expected to move up the leader-board of economies in response to strong activity in China and the easing of the global recession. Improved economic activity should also be expected in NSW and Victoria as financial markets heal and employment recovers. But whether the two largest economies regain economic supremacy will depend on the direction and planning of their respective governments. Overall, though longer-term prospects appear brighter for the resources-dependent states and territories.

Source Craig James, Chief Economist, CommSec

An amazing year for property in Australia

According to Residex, Autralia’s leading property research company.

It has been an amazing year, with the Australia wide growth in house prices being positive, and more amazingly, the rate of growth being the same to the year ending 30th September 2009 as it was to the year ended 30th September 2008. The rate of growth for both years was 4.64%.

With affordability being the main issue, rents are likey to increase faster, thereby increasing yield for property investors. Go to the residex website for more info.

Here are the September 2009 results:

House prices are expected to surge by about 20% between now and 2012

House prices are expected to surge by about 20% between now and 2012, according to the Housing Outlook Report from 2010 to 2012 by mortgage insurer QBE Lenders’ Mortgage Insurance (QBE LMI).

Driven higher by on-going shortages QBE LMI chief executive Ian Graham said “Double digit house price growth is forecast across all capital cities from June 2009 to June 2012.” The report researched by BIS Shrapnel has predicted the following house price increases:  

• Adelaide to lead national growth by an amazing 23%

• Sydney to grow by 21%

• Melbourne to increase by 19%

• Brisbane and Hobart to grow by an expected 15%

• Darwin increase by 17%

• Perth and the ACT to be around 12%

Property Investment Aggregators Oct 09 Report

Property Investment Aggregators
Market Report – October 2009

Property Investment is certainly a hot topic at present & one thing is certain; there are mixed messages all over the place. Whether it is based on the economy, share market or the property market, these mixed messages are creating confusion. To be truly transparent we need to look at the pro’s and con’s and not just the sugar coated gloss that many property investment writers are promoting with hidden agenda’s possibly being the reason.

According to Commsec’s Chief economist, “Australian home prices soared to record highs in August, underpinned by low interest rates, grants to first home owners and growing confidence about the job market. The RP Data-Rismark Hedonic Australian Home Value Index lifted by 1.9 per cent in August, the eighth consecutive monthly gain. Over the past year, Australian dwelling prices have risen by 6.6 per cent – the strongest gain in 15 months. Across all capital cities, dwelling prices are higher than a year ago. The RP Data-Rismark Hedonic Australian Home Value Index is now 3.8 per cent higher than the previous peak set in February 2008.”

Higher-priced suburbs are now showing stronger price gains than cheaper suburbs. Both top-end and medium-price home prices have risen 8.2 per cent since the start of the year with prices in cheaper suburbs up 7.5 per cent. We all know that the lower-priced sectors of both housing and units have been the strongest sectors over the past year on the back of the various stimulus packages. These properties have been mostly owner occupied. The sectors where we have seen biggest falls have been based generally around lifestyle properties.

The upper price level homes and units generally fall into these categories. So instead of people selling their family home, they are selling the holiday house or over committed investment property and subsequently we have seen a significant softening in these values. In some cases, these values have fallen well below replacement cost, which could present new future opportunities.

There is an interesting change in the gap between lower priced property and upper priced properties. For example, a property that was worth approximately $350,000 in say 2005 could now be worth in the vicinity of $400,000. Whereas a property that was previously worth $1,300,000 in the same period could now be worth $1,000,000. This leads us to believe that investment properties in the mid range below $500,000 will most likely remain in demand and a much safer
investment opportunity, as demand by tenants in these areas will remain strong.

August Price Growth:

1. Melbourne up 2.7 %

2. Sydney up 2.1 %

3. Canberra up 1.9 %

4. Brisbane up 1.4 %

5. Adelaide up 1.3 %

6. Perth up 0.6 %

7. Darwin down by 0.8 & after rising 3.1 % in July

Australia’s two biggest capital cities have also outpaced the rest of the nation this year, with Melbourne prices rising 11.6 per cent and Sydney up 8.67 per
cent in the first eight months of 2009. Overall, Australian house prices are up 7.9 per cent in the first eight months of 2009.

The Federal Governments recent forecast of Australia’s population growth is that it will increase from 22 million to 35 million by 2050, an increase of around 65%. In fact Australia is poised to be the world’s fastest growing industrialised nation over the next four decades, with a rate of population growth higher than India.

Three main series of projections provided by the ABS are, Series A, B and C, and have been selected from a possible 72 individual combinations of the various assumptions. Series B largely reflects current trends in fertility, life expectancy at birth, net overseas migration and net interstate migration, whereas Series A and Series C are based on high and low assumptions for each of these variables respectively.

In Series B, all capital cities are projected to experience higher percentage growth than their respective state or territory balances, resulting in further concentration of Australia’s population within the capital cities. At 30 June 2007, 64% of Australians lived in a capital city. By 2056 this proportion is projected to increase to 67%.

Source: ABS

No doubt there will be problems associated with this continued rapid growth. For example where will we house all these people? How will we feed them?
The higher the population growth, the more homes need to be built. Currently we have an undersupply of properties as too few new dwellings are being constructed to provide homes for our growing population and this undersupply is only likely to get worse.

The divergence between supply & demand becomes quite clear in this graph:

Source:
ANZ

The growth will be mostly in and around our capital cities, but new regional areas will be expanded to create regional cities, especially around mining areas that are designated for expansion. All this will put considerable upwards pressure on housing prices and the rental market.

Many buyers that did not do their due diligence and have bought ‘off the plan’ at the peak of the market and have not experienced anticipated capital growth are looking at how to offload their bad decisions, and the blame game has now become popular in the legal world. The once easy loan approvals, turned into a nightmare of panic driven uneducated buyers and litigation hungry lawyers and the full impact to the market cannot be appreciated until legal outcomes are finalised.

Some developers are still holding much higher levels of stock than originally anticipated and will need to meet the market to avoid meeting the lenders foreclosure departments. Fortunately those that can afford to settle are buoyed by strong rental demand and future anticipated growth. Those developers that let greed rule their business decisions are now stuck with mortgage repayments that are pushing their loan to value ratios into dangerous waters. And the once friendly lender will become their nemesis as the levels of acceptable risk will determine the outcome.

All of this points to the fact that whilst we are experiencing record population growth, record low interest rates and an undersupply of housing, there are areas which are outperforming the market and there are areas that are underperforming or even going backwards, and there are still plenty of developers out there with unsold stock at greatly inflated prices.

Whilst all the ducks are lining up, you need to watch out for the wood ducks i.e. it looks like a duck, and quacks like a duck, but it’s not a duck. In fact it is likely there is a 12 gauge barrel lurking in the reeds ready to blow you out of the water. Which is why professional research and experience is paramount to making the right decisions?

Property Investment Aggregators innovative research model incorporates many years of experience from qualified finance & real estate professionals. We
incorporate independent research from Australia’s leading research providers such as, Residex, BIS Shrapnel, RP Data, ABS, major financial institutions and renowned
property valuers. We then identify property investment locations that are likely to outperform.

We research available property opportunities in selected areas and provide independent research and valuations with our unique summary report.

We then provide our business partners and investors with a full detailed report on the property, area, builder, cash flow analysis plus a summary page including suburb profiles, location and property features plus key property and investment fundamentals they need to know. Such as:
 

We then upload this information to our member’s only website at

www.propertyinvestmentaggregators.com.au
and provide detailed property investment analysis tools for members to easily locate suitable properties for investment according to fundamental indicators.

We also provide our unique full research reports and an online client management and sales tracking system for you to keep updated on the status of your clients purchase.

We continue to monitor trends to maintain a high quality of property investment opportunities.

Our Best Picks

We have not seen any of our market segments in Toowoomba fall in value over the past 12 months. Property volumes and values below $350,000 in the past 6 months have improved. There are no individual suburbs which can be identified as being under performers. Property in Toowoomba generally has been underpinned
by limited supply and vacant land availability.

In regards to Gladstone, only recently have agents reported that there is a small ground swell of interest in the lower end of the market, however the market is still standing back to wait and see what happens with the Coal Seam Gas market here and abroad. One of our star performers has been Dalby in the Surat Basin. With properties in the 365k range being snapped up and an undersupply of land and extensive infrastructure due to the abundant supply of Coal and the new clean energy methodologies, we have reports of rents of $500 p/wk or more on these properties.

We still have very good house and land packages in Chinchilla from $348K and Kingaroy from $410K and villas in Toowoomba from $295K and Gladstone from $265K. Kingaroy was rated by an investment magazine as the hottest property place in QLD.

Other areas showing strong demand are the more sought after areas in Sydney, Melbourne and also our pick for Adelaide would have to be Brompton/Bowden which was recently featured in Property Investors magazine as a hot spot due to the state government’s master-plan for sustainable development and emphasis on transit-orientated developments close to the cbd.

Also, the northern suburbs of Adelaide are providing strong demand for
affordable housing. And as Adelaide had a shortage of well placed student
accommodation, we are fortunate to have what we believe to be Adelaide’s best
positively geared student accommodation building located in the heart of the
city.

Brompton Aerial View

If you are interested to find out about our researched selection of properties or to add property investment to your business to provide added benefits to your clients with repeat business call us on 08 8297 1333 or logon to

www.propertyinvestmentaggregators.com.au for
more info.

Home prices soar to record highs in August

Monthly home prices

According to Commsec’s Chief economist, Australian home prices soared to record highs in August, underpinned by low interest rates, grants to first home owners and growing confidence about the job market.

The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – lifted by 1.9 per cent in August, the eighth consecutive monthly gain. Over the past year, Australian dwelling prices have risen by 6.6 per cent – the strongest gain in 15 months.

Across all capital cities, dwelling prices are higher than a year ago. The RP Data-Rismark Hedonic Australian Home Value Index is now 3.8 per cent higher than the previous peak set in February 2008.

Higher-priced suburbs are now showing stronger price gains than cheaper suburbs. Both top-end and medium-price home prices have risen 8.2 per cent since the start of the year with prices in cheaper suburbs up 7.5 per cent.

According to Commsec this is what it all means?

                        It is a simple case of supply and demand. Demand for homes is being spurred by super-low interest rates, the fastest population growth in 40 years and grants to first home buyers. At the same time, Australia continues to experience an under-supply of homes through lack of building over recent years. Demand is out-stripping supply of homes, and as a result prices are rising.                         

                        If home prices were just rising in the cheaper suburbs then you could put the gains down to the grants to first home buyers. But prices in upper-end suburbs are now rising at a faster pace than cheaper locales.                          

                        For the two-thirds of Australians that either own or are buying homes, the solid growth in home prices is clearly good news. Rising home and share prices are lifting wealth levels and consumer confidence – both factors that should underpin spending levels in coming months.                          

                        No doubt the coming rate hikes and lift in home building will serve to restrain growth in home prices. But it is still a case that population growth is outstripping housing supply by a big margin. And a raft of barriers on the supply-side such as zoning requirements and access to finance are preventing developers and investors from entering the market.                          

                        Governments, industry bodies and financiers need to come together to address the barriers that exist. If action doesn’t occur to lift the supply of dwellings then Reserve Bank fears of a housing bubble could end up being realised.                         

                        CommSec expects home prices to rise by around 8 per cent over the coming year, a rate of growth in line with longer-term averages. Strong fundamental demand for Canberra homes will continue over the year but affordability will soften as the Reserve Bank lifts interest rates to more ‘normal’ levels. 

•      The RP Data-Rismark index utilises Australia’s largest property database and measures prices of houses and units so it is clearly the most accurate measure of dwelling prices and one that the Reserve Bank closely monitors. 

According to Commsec this is what the figures show?               

                        The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.9 per cent in August, the eighth consecutive monthly gain. House prices lifted by 1.8 per cent with unit (apartment) prices up by 2.1 per cent.                         

                        Over the first eight months of 2009 capital city home prices rose by 7.9 per cent. Over the year to August dwelling (home) prices were up 6.6 per cent – the strongest annual increase in 15 months.                         

                        House prices in August were up 6.0 per cent on a year ago with unit prices up 8.3 per cent.                         

                        In August, Melbourne dwelling prices rose by 2.7 per cent followed by Sydney (up 2.1 per cent), Canberra (up 1.9 per cent), Brisbane (up 1.4 per cent), Adelaide (up 1.3 per cent) and Perth (up 0.6 per cent). Dwelling prices fell by 0.8 per cent in Darwin after soaring by 3.1 per cent in July.                         

                        Over the past year, Darwin dwelling prices recorded the strongest gain, up 17.9 per cent, followed by Melbourne (up 9.5 per cent), Canberra (up 8.6 per cent), Sydney (up 7.4 per cent), Brisbane & Adelaide (both up 3.8 per cent) and Perth (up 1.8 per cent).                         

                        RP Data-Rismark calculates the median capital city house price across Australia at a record high of $514,416 with the median unit value at a record high of $418,806.                         

                        According to RP Data-Rismark, returns on Australian dwellings (accumulation index), grew by 11.7 per cent over the past year, the fastest pace in 15 months. The gross annualised rental yield for units of stands at 14.1 per cent while house rental yields stand at 10.9 per cent. 

According to Commsec this is what is the importance of the economic data?

                         The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 170,000 sales during the first eight months of 2009 (and over 129 million data records in total). Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.                         

                        The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.                         

                        Rising house prices serve to lift consumer confidence and wealth levels. However rapid increases in home prices lead to weaker housing affordability. 

According to Commsec these are what the implications are for interest rates and investors?  

                        The strong lift in home prices increases the risk that the Reserve Bank will lift rates later this year rather than early next year. CommSec still expects the Reserve Bank to deliver the first rate hike in February 2010, but the chance of a move in November or December has risen to around 40-45 per cent.                        

                        The lift in home prices in response to strong fundamental demand will lead to greater home building and renovation activity. The strong lift in home prices improves prospects for consumer and housing-dependent companies.

http://www.propertyinvestmentaggregators.com.au