Australian Housing recovery stalls

Hopes for a recovery in the housing sector have been dashed by fresh data showing new home sales were flat in July.

The volume of new home sales increased 0.1 per cent in July, following a 0.5 per cent increase in June, the Housing Industry Association said today.

“Housing finance figures point to an emerging recovery in trade-up buyer and investor numbers, but looking beyond first time buyer related activity we’re not as yet at a point where we can talk of a broad based recovery in private new home demand,” HIA chief economist Harley Dale said in a statement.

States showed a wide variation in results with house sales dropping 4.4 per cent in Victoria, 11.6 per cent in South Australia and 3.1 per cent in Western Australia.

In NSW they increased 9.8 per cent and vaulted 10.2 per cent in Queensland. “Throw into the mix approvals processes that are bogging down the recovery and a slow start to the Social Housing Initiative and we are looking at a moderate rather than strong lift in building starts through the second half of 2009,” he said.

The Federal Government had hoped that the First Home Buyers grant, along with record low interest rates, would jumpstart the housing industry and provide a catalyst for the economy in coming months.

The First Home Buyers grant boost is set to reduce to $14,000 from $21,000 by the end of September. The Reserve Bank is widely expected to begin raising interest rates from its current level of 3 per cent, possibly as early as October.

“In a change of forecast, we have dragged forward the expected timing of the RBA’s first rate hike to October, from February,” said JP Morgan economist Stephen Walters in a statement.

However, in the wake of more evidence that Australia’s economy “apparently has skated through the financial crisis without sustaining much damage, the case for an earlier tightening has become irresistible,” he said.

Australian house prices defy the economic downturn

Median Australian house prices appear to have defied the downturn.

Predictions of a dire downturn of Australian house prices seem to have been shaken for the time being, as most residential markets ended the 12 months to the end of June in positive territory.

Although the outlook for residential property in 2010, in the post-first-home-owners-boost payment period, is uncertain, figures from Residex show few markets posted big falls in the past financial year.

Perth was the worst performing market of the period, with a 5.76 per cent fall in the median value, to $475,500. The dip followed a couple of exceptional years of growth and a 10-year average of healthy, 12.41 per cent annual gains.

At the opposite end of the spectrum is Darwin, which powered on regardless of the economic downturn, achieving 14.81 per cent median house price growth, to a median house price of $477,000.

Sydney’s median house price sits at $577,500, after the harbour city posted marginal 0.79 per cent growth during the year.

Melbourne outclassed its northern neighbour, with gains of 2.69 per cent during the same period. Its median house value is now $492,400.

Brisbane’s fell slightly, by 0.06 per cent, in the 12 months to June 30, to end at $452,500. Like Perth, Brisbane’s fall comes after a period of strength, including 15.2 per cent growth in the 12 months to June 30, 2008.

Canberra’s median house price is $474,000, after gaining 1.36 per cent in the year to June 30; Hobart’s $356,000 after gaining 2.82 per cent.

Melbourne house prices predicted to rise nearly 20% over next 3 years

AUSTRALIAN house prices will rise by nearly 20 per cent over the next three years, buoyed by the “current heat” in the market surrounding first home buyers.

A recent forecast from research house BIS Shrapnel’s Residential Property Prospects report – based on data from the Real Estate Institute, predicts that Melbourne house prices will rise by nearly 20 per cent over the next three years, buoyed by the “current heat” in the market surrounding first home buyers.

Angie Zigomanis said activity in the lower end of the market – buoyed by the boost to the first home owners grant and low interest rates – were generating “green shoots” of recovery.

The report says average house prices in most capital cities will grow by between 11 and 19 per cent over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.

Mr Zigomanis, who said actual prices were more indicative than prices adjusted for inflation, predicts the boost to the first home owners grant combined with low interest rates would kick start further activity in the “upgrading” market.

“If the first home buyers are in the market buying, someone is selling it to them,” he said.

“We’re expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property,” he said.

Mr Zigomanis said once the (boost to the) first home owners grant expires, and first home buyers drop back out of the market, there’s enough activity in the market so it becomes self-sustaining.

The boost to the first home owners grant will finish at the end of this year.

But the research, based on Real Estate Institute data, said house prices would remain relatively stagnant until unemployment peaked around June 2010.

“Everything’s pointed at people jumping in the market”.

“At the moment we’re dealing with a confidence issue,” he said.

Weak economic growth and rising unemployment meant Australians were hesitant to jump into the market, he said.

The Government forecast in its May Budget that unemployment will rise to 8.5 per cent by mid-2011, leaving one million Australians out of work.

BIS Shrapnel predicts unemployment to peak “somewhere between 7 and 8 per cent” mid next year.

Mr Zigomanis said unemployment would impact house prices “more so from a confidence perspective”.

“Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook,” he said.

Melbourne Prediction:

• Median house price $425,000 in June 2009-06-12
• A fall of 6 per cent for the financial year
• Pick up in “upgrader” activity expected
• Nearly 20 per cent increase in prices to 2012

Australian home sales climb to thirteen month high

New home sales rose to their highest level in 13 months in March, as the first-home buyers grant buoyed demand.

Total new home sales rose by 4.2% last month to 8210, accelerating from the 3.9% growth pace in February, according to the Housing Industry Association. The increase marked the third month of gains.

”It is clear that in the first quarter of 2009 the project home building market was buoyed by the First Home Owners Boost for new dwellings together with very low variable mortgage rates,” said HIA Chief Economist Dr Harley Dale in a statement.

”The First-Home Owners Boost for new dwellings is clearly lifting residential building activity and securing jobs within the Australian economy,” he said, calling for an extension of the program past its June 30 cut-off.

Federal Government leaders, including Prime Minister Kevin Rudd, have hinted they intend to scale back incentives for first-home buyers, announced as part of the first round of stimulus spending aimed at reversing the economic slump. The current grant rises to as much as $21,000 if the purchase is for a newly built residence.

Among the states, detached home sales jumped 4.1% in March, led by New South Wales, where they increased 15.2%.

”While the rate of growth in sales reflects to an extent the low base from which a recovery is emerging,” the HIA report said, ”there is no doubt that the previously mentioned triple boost from low interest rates, stimulus to first-home buyers, and builder discounts have injected some life into a previously moribund new home building market, especially in Sydney.”

Sales of detached houses also jumped 14.6% in Victoria and 7.3% in Western Australia, the HIA said.

Low interest rates and the first-home owners’ boost are having a targetted effect, spurring house sales but leaving multi-unit sales ”at very weak levels,” the HIA said.

Sales of apartments rose 4.7% in March, following a flat February and four straight months of falls, HIA said.

”This reinforces the fact that while investor enquiries have increased in recent months, actual building activity in the residential investment space is still heading south, a concerning sign for low and lower middle income rental households.”

Melbourne real estate in a flux

Recent data from the Real Estate Institute of Victoria (REIV) reveals that residential property in the more affordable Melbourne suburbs are appreciating faster than those in traditionally affluent areas such as Toorak, Canterbury and Camberwell.

The REIV’s quarterly house price figures show that fifteen of Melbourne’s “top 20″ growth suburbs for the first three months of the year had a median price below $500,000.

Real estate industry executives say this is because of falling interest rates and first home buyers’ grants.

Suburbs with the fastest growing prices included Mount Martha, up 16.3 per cent to $500,000, Keysborough, up 12.9 per cent to $390,000, Epping, up 8.1 per cent to $303,000, and Boronia up 6.9 per cent to $355,000.

However, the overall Melbourne median house price fell 3.1 per cent to $410,000.

Prices for the cheapest 25 per cent of houses also fell, down 1.4 per cent, while the most expensive 5 per cent of houses dived 12.9 per cent.

That compares with data yesterday from rival analyst RP Data-Rismark, which is used by the Australian Stock Exchange, and which showed Melbourne houses rose 2.4 per cent to $426,423.

REIV chief executive Enzo Raimondo said the institute collected its data directly, and the results reflected about three-quarters of total sales.

He said the figures showed that while the first home buyers’ boost was clearly working to stimulate activity, it was not dramatically inflating prices, as some industry commentators had suggested.

“Everybody’s saying that the first home owners’ grant is pushing up prices but I think what’s happened is it’s helped activity, not necessarily driven prices up,” he said. “Growth actually slowed in all the parts of the market, whereas last time it was only the top.”

The number of transactions in the first three months of this year was about the same as in the December quarter, at just over 12,000 — even though January is traditionally very quite in real estate because of school holidays.

He said the financial crisis meant people were reluctant to sell their homes and stock levels were extremely low compared with the 2007 real estate boom.

Mr Raimondo said stock levels and transactions could drop further if governments removed their first home owners’ boosts as suggested after June 30.

The Federal Government has doubled its grants to $14,000 for existing homes and tripled them to $21,000 for new homes, while the State Government is offering $3000 for existing homes or $5000 for new homes.

However, Prime Minister Kevin Rudd last week suggested the boosts would expire as planned on June 30. Developers are calling for the boosts for new homes to stay, arguing that it is better to direct money towards construction than to owners of existing homes.

But Mr Raimondo said the removal of grants for new and existing homes would mean a drop in economic activity and employment.

“It’s going to affect transaction numbers, it’s going to affect competition, it’s going to affect how many people are going to be employed in real estate after June,” he said.

Australian Housing Market Outlook

John Symond, gives his views on the state of the Australian Residential property market. He discusses the future of the first home owner grant and talks about why the big 4 banks are justified in not passing on the latest interest rate cut in full.

The stress of re-entering the housing market

(By Guest Columnist) Re-entering the housing market can prove to be a disheartening experience, despite the grants.

I’m fuming. After the financial catastrophe of divorce several years ago, I’m trying to get back into the housing market.

I’ve found a beaut little place that I can afford, but I’ve done this once before, so I know that a mortgage is like a marriage in one very real way – decide in haste, repent at leisure.

The problem is I am bidding against young, inexperienced buyers with $14,000 from the federal government’s first-home-buyers grant in their pockets, being hurried and harried into purchases that they cannot truly afford by (some) real estate agents and by the artificial cut-off date for the grant of June 30, this year.

If they don’t get their house before that arbitrary date, the $14,000 vanishes; or $21,000 if they build a new home. Then add the other $5000 or $7000 that most state governments offer first-home buyers, and the $10,000 cash-back deals from some developers.

The fact that these grants have pushed up prices isn’t really on their inexpert minds.

Sure, I got my grant of $7000 back when I bought a place. But I thought it was bad policy then and I think it is bad policy now.

The first-home-owners grant was introduced by the Howard government in 2000, just in case home-price inflation benefit to the people to smooth over the introduction of the GST back the 10 per cent tax dampened demand.

Instead, the grant caused another mad flurry of and entrenched a policy that provides the least it is supposed to help – first-home buyers.
It should be called the home-vendors bonus.

Low interest rates, tax policy and government handouts have pushed home prices to absurd levels in Australia.

But every time market forces threaten to actually drive prices down enough for people like me to afford to get into the market, the government intervenes to prop up prices.

Why? Because most voters have mortgages, and they are used to the value of their homes growing in leaps and bounds – not going backwards.

The reality is the house prices are decided not by the market, but by the value of those votes.

Are property sales building momentum?

Well, what do you know – there’s life in the property market again. After years of Australia languishing in the doldrums, the heady combination of falling prices, record low interest rates and generous financial incentives to take the first step onto the property ladder are enticing buyers in droves. In fact, attend a Saturday morning showing for a property in the first-home buyers’ domain of $600,000 or less and you could be forgiven for thinking the boom is back.

So should you join the throngs at the auctions? The external factors are certainly appealing. Interest rates are at 45-year lows and tipped to fall further yet. This means it’s now at least $800 a month cheaper to pay off and own a $400,000 property. What’s more, nowadays $400,000 probably gets you a bit more.

Nationally, prices have fallen by just under 3 per cent in the past year, RP Data states. And you may get a particularly good deal in Perth and along the eastern seaboard at the moment.

Then there’s the enhanced first-home buyers’ grants. Until June 30, the base grant of $7800 has been doubled to $14,000 for buying an existing property and tripled to $21,000 for new ones. This assistance provides significant impetus to get in now – and let’s hope the success of this stimulus measure will persuade the government to extend it.

Meanwhile, the situation for prospective investors is also better than it’s been in years. Thanks to the steady rent increases generated by a dearth of properties in recent times, along with the price stagnation, yields are looking attractive again. In fact, positively geared properties ? so long the Holy Grail of investors ? are a real possibility.

Just remember that whatever is going on in the broader market, the time to buy is when you are ready, not before. Ensure you have a decent deposit, you borrow an amount you can service with no more than one-third of your before-tax income and that you can cope with rapid interest rate rises. After all, we’ve seen recently how fast things can turn.
Happy hunting,

First Home Owner Grant may be creating property bubble

It’s now being reported by some analysts that there is sufficient evidence to suggest that the first-home-owner grant scheme is creating a new ‘property bubble’.

Will the government extend the inflated first-home-owner incentives beyond June 30? At the moment, first-home owners buying existing homes get $14,000 from the government. Previously they were getting $7000. If they buy a new home, they get $21,000.
The problem is that most experts think (and history agrees) the handouts simply push up prices. And house prices will drop if the incentives aren’t maintained.
Aussie Home Loans founder John Symond wants the federal government to extend the incentive package but only to those buying new homes.
“By giving the double grant on existing homes, it’s causing prices to go up by an amount greater, in my opinion, than the grant. So young people are paying $20,000 to $30,000, maybe even more, to get into a home. But they’re only getting their $14,000 [grant]. I don’t think it’s a good deal,” he says.
“That grant can’t go for ever and as soon as that’s pulled away, there’s a real danger of those [existing] property values dropping by 5 per cent or 10 per cent. Certainly the government needs to pr ov id e stimulus and the best way of doing that is to give the double grant … to first-home buyers buying a new property. That way it creates jobs and … takes some pressure off the rental problems by creating new housing.”

$173 million for new affordable housing in Victoria

VICTORIA will get $173 million to build new affordable housing for families in need, the Federal Government announced today.

Federal Housing Minister Jenny Macklin said the investment was part of phase one of the $6.4 billion social housing component of the government’s Nation Building and Economic Stimulus Plan. Some $692 million has been distributed nationally.

“Working with the Victorian government, we have committed to deliver 667 new social housing dwellings across the state by July next year,” Ms Macklin said.

“Not only does this mean new homes for families, it will also support jobs in the construction industry, including apprenticeships.”

Victorian Housing Minister Richard Wynne said the new homes would deliver benefits to those Victorians in need.

“This boost from the stimulus package will help create or secure more than 3,000 new jobs as well as providing more affordable housing for the Victorian community,” he said.

“We’re looking to make housing more affordable for low and middle income earners by building new homes across metropolitan Melbourne and Victoria’s regional centres.”

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About Me

Kate Williams has extensive experience working in property valuation and property rental in the UK and Australia over a 10 year period. Kate is now the Managing Director of a Melbourne based Relocation company which initially finds short term fully furnished rental accommodation for new arrivals to the city.

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