Extracts from RP Data's Property Pulse this week:
"With fewer buyers in the market, ABS statistics are highlighting a reluctance by developers to initiate the building of new housing projects. This may be good news for sellers, as the lack of new stock helps to underpin existing market listings with a floor price. Investors should also benefit as population growth and a general housing shortage will likely drive up rents in coming years.
The new figures suggest residential developers are still cautious of soft market conditions despite a fundamental undersupply of residential housing stock. The reluctance from developers to build is understandable: buyers are few and far between at the moment and the number of housing loans continues to fall as credit standards tighten. Adding to the disincentive to build are the ongoing rises in the cost of construction materials and shortage of labour.
The net results of these two factors: low levels of housing construction and strong population growth, are at odds with each other. At the base level we are seeing demand for housing far outstripping supply, and the situation is worsening.
There are two factors flowing from this supply/demand imbalance. Firstly, the undersupply of dwellings places a natural floor under housing prices. This is the fundamental reason why property values have not fallen further in Australia’s major residential markets.
Secondly, the pressure is building on the rental market. Vacancy rates are averaging less than 2% across the nation’s capital cities and rental rates for houses have increased by almost 11% over the last year. We should expect to see rises of a similar magnitude over the coming year.
As property value growth remains sluggish and rental rates continue to power ahead we can expect rental yields to show consistent improvements. For investors the prospects are quite compelling: strong buying conditions and the prospect of improving returns. For renters the news isn't so good – expect further rent rises and more competition for quality rental stock. Now may be the time to consider extended lease arrangements to lock in at today’s prices!"
Landmark White says, in a recent email newsletter:
"LandMark White expects the Brisbane residential market could fall by up to a further 5% in the next six to twelve months. We anticipate the landing will be quite soft across most market sectors due to the strong fundamentals in the Brisbane market including population growth, under supply of housing and a strong rental market however there is a risk the market may get worse rather than better. This appears to be very much dependant upon overseas issues and a slowing global economy. In the medium term, the only prospect of a change in the market is for the Reserve Bank to soften interest rates further. This now seems more possible however there is a perception that as interest rates fall further, the price growth seen over 2007 will return. This optimism may prove to be unfounded with buyers more likely being more aware of the negative implications of such a price growth cycle and issues of affordability."