Unit rental growth over the last five years has also recorded significant increases in Darwin (84.0%) and Perth (61.7%). The three largest cities have recorded the lowest levels of rental growth at 39.6% (Melbourne), 40.6% (Brisbane) and 42.8% (Sydney). ...
Saturday, November 13, 2010
Rental Returns - from RP Data Property Pulse
Unit rental growth over the last five years has also recorded significant increases in Darwin (84.0%) and Perth (61.7%). The three largest cities have recorded the lowest levels of rental growth at 39.6% (Melbourne), 40.6% (Brisbane) and 42.8% (Sydney). ...
Pet Friendly Apartments
Basically, the Adjudicator has upheld the protest that the 212 Margaret by-laws, which did not permit any pets at all, were invalid and unenforceable, and has ordered them changed to a permissive by-law. This dates back to a CCT ruling in 2008 (Tutton v Body Corporate for Pivital Point Residential) where the CCT magistrate ruled that total pet bans were unreasonable since certain species of animal could on no rational basis cause any difficulty to any other lot owner.
In addition, it appears there has been a further QCATA ruling in September 2010 -- McKenzie v Body Corporate for Kings Row Centre 28/09/2010 -- in which the tribunal decided that even by-laws that attempt to ban only a certain type of pet (cats and dogs) are also so unreasonable as to be effectively invalid and unenforceable. In that case, the disputed by-law was permissive of pets in general but attempted to outright ban only 'cats and dogs' specifically.
Essentially this all comes together to mean that a (or any! within a Community Titles Scheme) Body Corporate can no longer expect to ban pets (or any kind of pet) outright, even if they have already done so by voting in a ban/restrictive by-law, or even if the building was originally set up with a pet ban/restrictive by-law.
It also means that if anyone protests such a restriction, the Adjudicators will uphold their protest, allow the pet (if it's a reasonable request and there is no evidence of a reasonable reason the pet would be unsuited to the property), and forcibly change the by-law back to a permissive one. Just like they just did with 212 Margaret.
The flow on outcome from these rulings are clear: the face of Community Titles Schemes must now change - pets can no longer be banned, and Committees and Body Corporate's can no longer expect to stop people from bringing their pets to live with them in apartments, units or townhouses - unless they can provide reasonable grounds or evidence that the particular pet would be unsuited to the lot. From what I understand, this new thinking has already been tested multiple times in the Appeals process and the Adjudicators subsequent interpretation of this has also been made abundantly clear.
212 Margaret is now (forcibly) pet friendly.
SouthPoint Coming Soon?
Fairfax is Getting Dumber
Recently, the Domain property website had an offer -- Saturday's Sydney Morning Herald and the Sunday newspaper delivered in hardcopy for $10 total for 10 weeks. I thought that this would be good, so that I could look at the real estate advertised for sale in Sydney. So far, about 5 weeks into the subscription, I have received only 2 newspapers. And the Saturday SMH that is delivered does not include a real estate section. No wonder Fairfax is going backwards.
Will Mosaic Go Ahead?
ONE of Australia's biggest developers has continued to sell units in a proposed $150 million Brisbane tower even though city planners have rejected the project.
Since marketing started a year ago, Leighton Properties has sold just over half of the 212 apartments in its planned Mosaic development at the corner of Ann and East streets in Fortitude Valley.
More than $4 million in deposits has been paid by 107 buyers - many of whom were told the 18-level residential and retail complex would be completed by late 2012.
But Brisbane City Council threw out the development application because of height concerns, forcing Leighton to file an appeal with Queensland's Planning and Environment Court in August.
Leighton state manager Andrew Borger said he met with council planners this week and the two sides were ''narrowing down the issues''.
If no deal is struck, a five-day court hearing has been set down for March next year.
Mosaic unit buyer Wagner Higgins said she recently learned about the question mark hanging over what could be one of the Valley's biggest developments.
''It does concern me because I would really like to live at that address,'' Ms Higgins said. ''But I don't think my money is at risk. The worst-case scenario is I get my money back.''
Ms Higgins, who paid a 10 per cent deposit, said Leighton representatives had been ''very forthcoming'' about the lack of approval and told her they were ''very confident'' it would proceed.
Yet she fears that her penthouse may disappear if height issues force a redesign of the project.
Council records reveal that planners also raised concerns with Leighton about the building's engineering, architecture and landscaping design.
Despite these hurdles, a Mosaic salesman last week claimed that approval was ''imminent'' and construction work would kick off in the first quarter of next year. A crane is already on site working on a neighbouring property.
In its appeal, Leighton said the Mosaic knockback had been ''overtaken by events'' since projects of ''greater building size, bulk and height'' had secured approvals in the Valley.
Among these were a council depot on St Paul's Terrace and a 20-level residential tower at Ann and McLachlan streets, the company said. But a council spokesperson said it was up to buyers to inform themselves before acquiring a property.
''Council strongly recommends people who are interested in buying units off the plan to satisfy themselves that the development has received all relevant development approvals prior to finalising their purchase,'' the spokesperson said.
Source: Courier Mail
Albert Street Railway
Royal on the Park (the old Park Royal Hotel) owned by the Sultan of Brunei is to be resumed to build an underground train station. How will this impact Sunland's proposed development on Alice Street at Albert Street?
"ONE of Brisbane's major inner-city hotels will be resumed with 38 other properties for the city's first underground rail line, it has been revealed. ...
Under the plans the Royal on the Park hotel will need to be resumed, alongside 38 other commercial and industrial properties in Salisbury, Rocklea, the CBD and Bowen Hills."
Source: Courier Mail and see also Brisbane Times
At least you will be able to get free WiFi here.
Sunday, November 7, 2010
Spring Hill - Trilogy Apartments
There were 3 auctions last weekend of 2 bedroom apartments in the Trilogy complex at Spring Hill (namely, apartments 226, 330 and 334)
This complex was heavily marketed (at high prices) by Which Property? who was also related to the developer.
The Courier Mail reported that apartments were passed in for $400,000 and $420,000 (about $150,000 less than the prices that the developer was seeking about 2 years ago).
These are relatively decent apartments, some with good views, and a large pool area. The apartments are not large (about 75 sqm internal) but are well designed. Not far from the downtown.
Listing at $490,000 (Apt 334, 51 Hope Street)
Listing at $490,000 (Apt 226)
Listing at $550,000 (Apt 330)
Listing at $680,000 (Apt 354)
A 2 bed, 2 bath sold in 2009 for $540,000.
A furnished 2 bedroom is available for rent for $650 a week. See also here.
Apartments or Hotels
"... Mr Punch alleged in his statement of claim that the original disclosure statement received from Niecon subsidiary South Sky Investments revealed that he was buying 'a lot in a residential building'.
If he were buying today, that disclosure statement would have to declare it was an 'apartment in a hotel', he said in the claim. ..."
From GoldCoast.com.au
This is a warning to developers who build apartment buildings (such as Aurora) and then sell the management rights to Oaks to operate a residential building as a hotel.
Flats Are Flat
There are head-winds for investors in the Brisbane apartment market:
- slowing population growth
- foreign investors selling, because they profit from the high Aussie dollar
- foreign investors not buying due to the high Aussie dollar
- less foreign students, so less renters
- higher interest rates
Recent articles set out some of these concerns....
"QIC chief executive Doug McTaggart has painted a grim picture of the residential market in South East Queensland. ... "Population growth in Queensland is suffering." ... Herron Todd White estimated there had been a 30 per cent drop in volumes from 2008. ... vacancy rates are trending up at the moment ... the current Brisbane market is showing some oversupply... " Australian Financial Review, 4 November 2010, page 60
"Overseas students and retirees are fuelling population growth in Brisbane's inner city, with nearly 13,000 people now calling the CBD home. While Brisbane's fastest-growing suburbs are in the city's east and south, the growth of inner-city living is the perhaps the most visible change.
"A lot of the accommodation now is just built for students and they have just small kitchens," Ms McLean said. She said five of the unit buildings in Brisbane's CBD were mostly student accommodation.
"Some of them where the students are living are turning into ghettos," Ms McLean said.
"Down Albert Street, Mary Street, at the Parklands (apartments) there at Roma Street," she said.
Source: CBD bulges as more move in
Units in Brisbane are among the cheapest in the country as property prices in the city continue to slide, according to analysts.
The Australian Property Monitors September House Price Report, released today, shows the median unit price in Brisbane fell 2.8 per cent from $366,533 to $356,352 in the last quarter.
Source: Brisbane unit prices on the slide
Brisbane's property market woes look set to continue for the forseeable future due a slump in migration and an oversupply in the market.
Analysts have tipped prices to remain stagnant or dip further at least until the middle of next year. ...
Property analyst Michael Matusik has long refuted claims of an undersupply in the owner-occupier and rental markets.
"Queensland's population growth is slowing - and significantly," he said. The state's net migration in 2008 was 84,275 people, with 21,228 arriving from interstate.
At the end of March this year, net migration fell to 55,845, with just 11,012 people coming from interstate.
"Our preliminary estimates suggest that more people are leaving Queensland now than arriving from interstate [due to the state economic downturn]," Mr Matusik said. Of the rental market he said: "The amount of vacant stock available is not only greater than most realise, but it is getting larger."
Mr Matusik said about 13,500 new rental properties were required to house 35,000 new residents to Queensland last year.
"Yet, 33,000 new rental digs became available - or over twice as many as was needed," he said. "This is not how I would define 'undersupply'."
Source: Property price slump
Sunday, October 31, 2010
Risks With Short Term Rental Buildings
When I am looking to buy an apartment in Brisbane, I look at Trip Advisor to see if there are reviews about the apartment building and the onsite manager. As a general rule, if the apartment building is listed with TripAdvisor, I will only buy if I am seeking a non-residental investment. There is limited resale opportunities for short term non-residential buildings.
Example Reviews:
- 212 Margaret
- Casino Towers
- Aurora
- Charlotte Towers
- RiverCity
- M on Mary
- Evolution
- Felix
- Festival Towers
- Skyline
Many reviews highlight the problems -- these buildings were designed for residential apartment living, not as hotels. People ask for adjoining rooms, and don't get them (of course). Items from rooms are stolen. Linen trolleys and food trays are left in hallways, as there are no service cupboards or service rooms for hotel staff. Furniture breaks, as the apartments were furnished for residents, not using hotel quality furniture. No minibars. Parking problems. I wonder what the owners of these apartments think about their real estate agents who are managing their investment -- a real estate agent pretending to be a hotel company.
I love this recent review for Evolution: "What a disaster. We never new accomadation could be so foul .. so many light bulbs broken, Filthy carpets, No drinking glasses (even when you ring & ask a certain staff member who couldn't have been any more passive agressive they still don't come) We changed rooms which was even worse, kitchen tap fell off in our hand, no shower door as it had broken off, huge rip in the lounge, even filthier carpets, rug all ripped, more light bulbs out, TV not tuned so most of the channels hissed at you a lot like most of the staff.. broken light shades, blind pullies broken. When we checked in they held on our credit card $200 for breakages.. there was nothing left TO BREAK!! This place is not rateable unless there is a minus."
Why would anyone want to buy in this building?
Saturday, October 30, 2010
Pricing Trends
"... Australia’s housing market has flat-lined in the second half of 2010. The monthly RP Data-Rismark Hedonic Home Value Index was the first benchmark to report a big shift in housing conditions with a substantial fall in Australian dwelling values in the month of June. This followed annualised double-digit capital growth since the start of 2009. ...
In the month of September, this theme continued with RP Data-Rismark’s Capital City Home Value Index effectively unchanged (+0.1 per cent seasonally-adjusted / +0.4 per cent raw). Since the market started turning at the end of May, Australia’s capital city home values have declined by a total of 1.0 per cent seasonally-adjusted (-0.8 per cent raw) according to RP Data-Rismark. (The previous August month capital growth estimate of 0.0 per cent is largely unchanged at -0.1 per cent). ...
The rental market continues to offer solid cash-flows, with gross apartment yields rising in the month of September to 4.9 per cent while yields on houses remained unchanged at 4.0 per cent.
Some of the highest yielding rental markets for apartments are Darwin (5.7 per cent), Canberra (5.3 per cent) Sydney (5.0 per cent) and Brisbane (5.0 per cent). The weakest apartment markets are Melbourne (4.1 per cent) followed by Perth (4.4 per cent).
RP Data’s senior research analyst, Cameron Kusher commented that with market conditions expected to be flat for the remainder of 2010, astute investors should now look for opportunities to enter into the market.
“Early signs suggest that rental rates are once again improving, listings are at above average levels, and leading indicators such as time on market and vendor discounting are creeping up.
“For those active in the market there is increasing scope for price negotiation and less competition amongst buyers with an above average number of properties for sale. These conditions are likely to afford opportunities to purchase property at more competitive prices,” Mr Kusher said.
See RP Data
Friday, October 29, 2010
At 20 At Kangaroo Point - New Development
New apartment development at Kangaroo Point. It will be twenty storeys. One bedrooms from $340,000; two bedrooms from $490,000. See At 20 website or alternative website.
New Farm Apartments
The AFR had an article last Friday about New Farm, titled "Grunge to groovy", that says:
"... Back from the river are art deco apartment blocks, Queenslander houses, and a few rather ugly residential developments. ... But prices are well and truly off their peak. ... Unit prices also fell, but only 6.8 per cent, to a median of $451,000. Some apartment buyers off the plan have made substantial capital losses. ..."
Real Estate Agent Tricks
Have you heard about these two tricks from real estate agents?
One is listing a property for sale by forthcoming auction, but never actually scheduling the auction. There is no list price, and the agent tells prospective purchasers do get in quick before the vendor has to pay for advertising, and that once the auction campaign commences, the vendor will not accept conditional offers subject to finance or building inspection.
The second trick is to set a high reserve at the auction. The agent then takes telephone bids, but in fact, the person bidding via telephone is a friend or co-employee. Because the agent knows the reserve, the fake telephone bidder comes in close to but just below the reserve. This bids the price up, and then when the property doesn't sell at auction (as it usually will not), the agent then lists the property at the reserve price and says that there was a bidder just below the reserve (which, of course is not true).
Opinions Regarding Brisbane Property
Here is a good set of articles from Michael Matusik, regarding Brisbane property:
Saturday, October 23, 2010
Undervalued Brisbane apartments
- Admiralty Towers One - undervalued - large riverfront apartments, with an excellent new onsite manager
- Admiralty Towers Two - possibly undervalued - large riverfront apartments, but onsite manager has gone bankrupt and some owners hostile to body corporate committee leading to inefficient building management
- Admiralty Quays - at value - beautiful riverfront building, but apartments are smaller than Towers One and Two
- Riverplace - at value - great location on riverfront with large balconies, but lesser quality than Admiralty buildings, and larger less personal building
- Skyline - overvalued - poorer quality building surrounded by other buildings
- Evolution - significantly overvalued - located on a freeway, sold mostly to Asian investors, small poor quality apartments in badly managed building
- Casino Towers - overvalued - good views from some apartments, but these apartments face West and views likely to be built out when old State Library site redeveloped into multistory tower
- 212 Margaret - overvalued - located on edge of construction site
- Charlotte Towers - probably overvalued - many apartments listed for sale and not selling
- Festival Towers - probably overvalued - poor quality Devine building, likely to be further surrounded by new development and remaining views built out
- Quay West - undervalued - large apartments with Gardens and river views never to be built out, well run building with good finances
- Grosvenor - at value - large apartments with Gardens and river views never to be built out, low turnover of apartments
- Felix - overvalued - smaller apartments looking with little privacy
- Metro 21 - mixed - great difference between apartments in this building - smaller well run building with much better value than the Oaks run buildings, but one bedroom apartments in this building are not great
- Aurora - overvalued - large, poorly run building
Apartment Auctions in Brisbane
Wednesday, October 20, 2010
Good Advice from Matusik
Matusik Missive – A new paradigm?
20th October 2010
The numbers of housing loans and new housing starts continue to slide. Every excuse under the sun is offered up as to why. The real reason, being an actual lack of demand, is rarely mentioned. But in short, buyers across the board are not that interested in buying residential property at present. This is especially the case for new stock.
Why?
Let’s cover the new supply first. This follows on nicely from the most frequent reply to our three-part urban myths missive series last month, which posed the question as to why a proper study into “what the market really wants” isn’t done. Well, we have done several; for the PCA for their Australia on the Move publication and for several clients including the Brisbane City Council.
In short, the current new supply is wrong. It is either too small, of limited quality and/or overpriced. What’s on offer too often does not offer value for money. Hence buyers increasingly opt for something established, which they might renovate or refurbish in the future, rather than buy a new dwelling.
In an ideal world, many would buy something alternate to the detached house, but only at prices much cheaper than new apartments, townhouses and the like are currently asking. In general, the market expects “other” housing to be about 20% cheaper than a detached house in the same area. Whilst they expect some shrinkage in the size of alternate accommodation, the current offerings are considered by most to be way too small.
Another complaint is that the quality of the new product – and in particular for apartments – is far too low for the prices expected. The thirst for a quality product is an opportunity and one which should grow in demand as baby boomers enter retirement.
The cheap and cheerful (often of late more “nasty” than “cheerful”) trend has gone too far. It is somewhat ironic that the housing industry is vamping up the supply of really tight product just as the emerging demographics suggest the opposite. Household sizes are increasing across Australia – fuelled by a baby boom, relatively high overseas migration and adult children remaining (out of choice) at home with their parents.
When it comes to existing product, many vendors, in short, want too much for the property. There is a flood of second hand stock on the market; the customary spring market pick-up is missing this year (although its impact is usually overstated) and with the threat of a further interest rate rise pending, vendors need to get realistic quickly or take their property off the market. Failure to do so could result in substantially lower offers (than a realistic price today) in the near future.
This issue was brought home quite clearly when a 293 square metre penthouse on the Brisbane River in Kangaroo Point (with uninterrupted views of the Brisbane CBD) was passed in at auction a few weeks back. The reserve was set between $1.2 and $1.4 million which equates to a paltry $4,600 per square metre.
Ironically, it is a buyer’s market and could be for some time to come – read “years” not “months” – yet potential purchasers are not buying. Usually and somewhat ironically, rising interest rates get interested parties off the fence. Maybe that will occur once the RBA actually moves the cash rate, but maybe not.
I cannot help but feel that we have entered a different paradigm – one in which a dwelling is a home, rather than a vehicle for speculation. If that happens, the term “real” estate will regain its true meaning.
To revisit our Aussie Urban Myths commentary visit newgeography.com
Saturday, October 9, 2010
Brisbane Skyline
Friday, October 8, 2010
Empire Square To Be Reborn
El Dorado Indooroopilly Delayed?
RP Data September Report
Christopher Joye commented, “We were not forecasting any further capital growth in the second half of 2010. Recent data vindicate this thesis. In the first seven months of 2010, capital city dwelling values have accreted by 4.8 per cent in raw terms, which is in line with consensus expectations for disposable household income growth.”
“Futures market pricing for interest rates has changed dramatically over the last month, shifting from expectations of rate cuts to at least two hikes by end 2011. But following hawkish RBA remarks, economists are now predicting we’ll get 4-6 cash rate hikes. We’ve modified our views accordingly,” Mr Joye said.
He continued, “If the resources boom combined with frisky consumer spending compel the RBA to lift the cash rate 4-6 times by end 2011, we would expect to see nominal dwelling values decline modesty. This is not a bad thing. Asset prices cannot always rise - the volatile sharemarket regularly subjects investors to savage swings. Since 1993 there have been five instances when the RBA has lifted the cash rate sharply. On every single occasion national capital city dwelling prices have flat-lined or declined. If the RBA aggressively raises rates, there is no reason to expect 2010-11 to be any different.”
Investment Apartment
Reserve Bank's View
Rents in 2010
From RP Data September Quarter 2o10 Rental Review
The slowdown in the rate of rental growth is commensurate with the Reserve Bank of Australia’s aggressive cuts to official interest rates as the Global Financial Crisis hit and the introduction of the First Home Owner’s Grant Boost. Both initiatives, coupled with softening property values during 2008 and consistent growth in rental rates during recent years, resulted in a significant boost to affordability for first time buyers. As a result during 2009, first home buyer activity was at its highest level on record. With first time buyers generally coming from the rental market it’s no surprise to see that the rate of rental growth had slowed so markedly."
Yardney's Advice
With an improving local economy, strongly rising population growth, rising rents and the ability to buy a bargain from some motivated vendors – the type of bargain that we couldn’t find in the last few years when there was strong competition from other investors – I know some investors will set themselves up for success in this current stage of the property cycle.
My personal strategy is to continue what I have been talking about and doing personally for years:
1. Buy the right type of property – one that has some element of scarcity, which will always make it appealing to owner occupiers (who push up the prices) as well as tenants.
2. Buy in an area that has always outperformed the market.
3. Buy at the right price –this should be below intrinsic value - the type of price that even if values do drop 5 or 10 % (and I don’t think they will in most areas) you will be covered.
4. Only buy a property to which you can add value – during this time of flat growth, manufacture some capital growth yourself through renovations or redevelopment. ..."
See "Is it time to worry.." from Property Update.
Saturday, October 2, 2010
Bowen Hills
- The Chelsea, 195 apartments, being co-developed by David Devine (now that he has left Devine)
- Code, 132 apartments
- Belise, 200 apartments
- Richmond Apartments, 107 apartments
Sunday, September 26, 2010
How To Lose Money in Property Investing
Sunday, September 19, 2010
The Milton at Milton
FKP has opened its sales office for "The Milton", a new apartment building that FKP plans to build next to the railway line at Milton Station.
- FKP's recent developments in Brisbane have not been great. Vue at Milton was did not turn out to be great, and many of the apartments there are still selling below the original sales price. The Albion Mill project never started. I considered the SL8 development at West End to be a disappointment.
- The Milton is being built on a railway.
- The Milton is located close to the XXXX brewery, and so residents will be impacted by smell, fumes and fallout from the brewery.
- Despite the nice brochures from FKP, The Milton is located a fair distance from the river. It is not river front, and will only have distant river views. There is the strong possibility that other towers will be built between this development and the river. In my opinion, the artist's impressions being distributed by FKP are somewhat misleading.
- There is the risk that the apartments on each end will be built out if similar apartment buildings are constructed on the neighbouring land. The Milton is not on a corner block, and this is a risk.
- The building does not have central airconditioning. The hallways are unlikely to be airconditioned. Not all rooms in your apartment will have an airconditioning output head. So FKP selected the low quality option here.
Sunday, September 5, 2010
Dishonest Real Estate Agents
Meriton's Infinity Pricing
I received this from a Sydney investor, who was asked to invest in Infinity, on Herschel Street in Brisbane:
- 1 bedroom with study with city views from: $398,000
- 1 bedroom with study with river views from: $448,000
- 2 bedroom with city views from: $525,000
- 2 bedroom with river views from: $560,000
Saturday, September 4, 2010
Month In Review
"Importantly, do not read ‘relatively affordable’ as ‘secondary quality’. It is better to stretch the dollar a bit and buy a dodgy looking second had unit with good bones and quiet position in an area such as Ascot or Toowong, rather than a brand newie in the same areas that is the size of a bathtub and has full exposure to rail noise. The good thing with these units is that they always have a strong rental demand and some value-add potential if you get something that needs a little love.
... there are some areas that you should steer clear of.
The first that comes to mind is on the Redcliffe Peninsula and specifically high rise unit developments. A favourable council hell bent on turning the area into something beyond a sleepy seaside habitat went gung ho with developers to create a mini Surfers Paradise along the esplanade. The result was a number of multi-level unit projects designed to take advantage of the views and the natural attributes that usually have investors salivating. Unfortunately the suitors became a little too enamored and far too many projects came out of the ground, with many units snapped up by out of town buyers for prices well beyond the average local punters cashbook. The result - there is now a glut of these attached dwellings throughout the area. Some initial buyers have lost large money and given the abundant supply on the market and the near zero demand from well informed local buyers, the prospects of growth appear somewhat limited for some time at least.
Gold Coast
Overall market sentiment has remained very slow/ subdued over the winter months, with minimal market activity and some less than impressive sale results. Therehas been a significant drop off in the number of sales and selling prices, and fingers are crossed that demand will increase as the election is out of the way and the weather warms up."
The report then lists recent sales where the vendor has lost money.
The report also states that the Brisbane apartment market is "peak of market" and that the Gold Coast apartment market is "declining" but that the Sunshine Coast unit market is at the bottom of the market. This would suggest that it is best to buy on the Sunshine Coast, than in Brisbane or the Gold Coast.
Landmark case sends a warning to investors
"Know how you should and shouldn't market your apartment, particularly when the onsite complex manager owns the building trademark."
Thursday, September 2, 2010
RP Data August 2010 Index
After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).
According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).
The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.
The slow-down in Australia’s housing market had been long-anticipated by RP Data and Rismark and was noted by the Reserve Bank of Australia in its most recent Board Minutes.
According to RP Data’s research director, Tim Lawless, the July index results are further evidence that Australia’s housing market has experienced a controlled soft-landing after a resounding recovery during the course of 2009.
“In the period between end 2008 and March 2010, Australian home values rose by 16.3%. Yet monthly growth rates have declined consistently since the start of the year. RP Data and Rismark expect to see the market track sideways over the second half of the year. There is the possibility of modest gains if mortgage rates remain in check and economic conditions continue to improve,” he said.
The deceleration in capital growth rates is evident across the cheaper, middle and more expensive suburbs tracked by the ‘stratified’ version of the RP Data-Rismark Hedonic Index. This index shows that while the most expensive 20% of suburbs realised the highest capital growth between end 2008 and March 2010, these same suburbs have suffered the largest falls in home values in the period since.
According to Mr Lawless, “As has been the case previously, the illiquid top-end of the market is showing higher volatility than lower priced markets. Home values in Australia’s most expensive suburbs fell more in 2008, rebounded quickly in 2009, and are now tapering at a more rapid rate than cheaper property markets. Home values in the most expensive 20% of suburbs were down 2.0% over the three months ending July 2010 compared with smaller declines of 0.4% and 0.7% in the cheapest 20% and middle 60% of the suburbs, respectively.”
Christopher Joye, Managing Director of Rismark International, said, “In contrast to claims that the decline in home values recorded in June would accelerate, we have seen quite the opposite: Australia’s housing market appears to have gravitated back to a no-to-very low growth trajectory, as we forecast.”
Mr Joye added, “RP Data’s leading indicator data also paints an encouraging picture. After falling from historically high 70-80% levels, national auction clearance rates have now leveled at around the 60% mark. While outstanding inventory levels have expanded in response to the weaker demand, they have recently settled. Perhaps most significantly, the futures market is currently pricing in no further interest rate hikes over the next 1-2 years. In recognition of the flat yield curve, we have seen some banks cutting the cost of fixed-rate loans.”
“Looking forward, I would expect to see the major banks pushing housing credit growth a little harder as profitability gains--driven by reduced impairment provisions across their business lending books--dissipate. Australian housing credit growth has been running at record low levels, and has experienced a downward trend since 2006. An increase in credit growth back to reasonable single-digit rates will provide further support to the market in the next 12 months.” Mr Joye said.
Mr Lawless agreed that substantial falls in Australian home values look very unlikely.
He said, “The number of homes being advertised for sale across Australia is only 5% higher than what we saw at the same time last year. We aren't seeing a blow out in stock levels and properties are taking on average about 40 days to sell, which is only a little higher than recent experience.
“And while we have noticed an increase in vendor discounting, this is coming off the very low base we recorded during 2009,” he said.