PREDICTIONS FOR 2013

This will probably be my last posting for 2012 so I will take this opportunity to thank all my clients and subscribers for their ongoing support over the past year. I wish everyone a very Merry Christmas and a safe a happy holiday period and look forward to catching up with everyone in 2013.

Now on to business

Everyone is asking what my predictions are for 2013 and up until now I have tried to avoid making such predictions.

I am expecting next year to be a better market, especially with the latest official interest rate cut taking rates to a record low and the experts predicting further cuts in 2013. However, in the past interest rate cuts would have a profound effect on the property market but the effect of this round of cuts has been softened by the banks not passing them on in full. 

That being said, since the cuts last week I have noticed an increase in the level of buyer enquiry, especially in the lower end of the market.

I am starting to think (or at least hoping) that we are nearing the final stages of a buyers’ market and hopefully over the next 12 months prices are going to rise. If you are a buyer looking to get into the market, upgrade or buy an investment, now is the perfect time. With fixed interest rates in the low 5% bracket you no longer need sky high rents to make your investment pay for itself.

I won’t talk too much about statistics other than to say Auction clearance rates have been over 60% for pretty much the past 2 to 3 months which indicates some stability and confidence in the market.

I know many people at this time of year begin to make plans for the following year and one of the items on the agenda is property. Both buying and selling.

As I said earlier, if you are thinking of buying now is a great time and the low interest rates are too good to resist. 

If you are thinking of selling it may be worth your while using the holiday period to prepare your home for sale or if you are ready to sell but think you need to wait until after the holiday period then you may in fact be wrong. The holiday period presents a perfect opportunity to take a soft approach to selling your home. I find that over December and January there are still plenty of buyers around: ex-pats returning home to visit family, people from out of town looking to buy a city pad or investment or simply local buyers looking to get into the market, upgrade or downsize.

Last Christmas holiday period I sold 40% of my February 2012 listings before the end of January using this approach.

IT'S TIME TO GET INTO THE REAL ESTATE MARKET: Terry Ryder

By Terry Ryder

www.propertyobserver.com.au
Thursday, 06 December 2012

 

This is as good as it gets, folks. It’s time to stop procrastinating and get into the real estate market. 

The Reserve Bank’s latest reduction in the official interest rate, which will probably translate into a 20 basis point decrease in mortgage rates, is the icing on a cake that’s pretty tasty for property buyers. 

The ingredients of the cake include higher incomes, lower prices, greatly improved affordability and interest rates at GFC levels, against a background of solid economic performance, low unemployment and, at long last, rising consumer confidence. 

According to the figures that comprise the HIA-CBA Housing Affordability Index, the median dwelling price is 5% lower than it was two years ago.

In the same time frame, average weekly earnings have risen 7.45%, while the interest rate marker they use has dropped from 7.12% in March 2011 to 6.03% in September 2012. Since September, we have had two interest rate reductions from the RBA. 

So we have had seven consecutive quarters of improving affordability, followed by the rate cuts in October and earlier this week. 

Figures from Mortgage Choice show that, since October 2011, the average standard variable rate has reduced from 7.79% to 6.6% (prior to this week’s RBA cut). Monthly repayments on a typical $300,000 loan over 30 years have fallen from $2,158 to $1,916, a saving of $242 per month. 

Looked at another way, those who have maintained their repayments at October 2011 levels will have reduced their loan terms by close to eight years, saving well over $100,000 in interest over the life of the loan. 

Buyers have been responding to the improving situation – gradually but steadily – with loan commitments to owner-occupiers up 5.5% in the past 12 months and loans to investors up 4%. 

But surveys have suggested many consumers were awaiting another trimming of the official interest rate before getting into the market. Now they’ve got their Christmas present. 

So the fence-sitters are all out of excuses. It’s really not going to get any better than this. 

Capital city prices have stopped falling and are now trending up in most the big cities. We have now had six interest rate cuts since October 2011 and we are unlikely to get more any time soon. 

Everything you’ve been waiting for is now in place. Stop mucking around and get active.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

RBA DELIVERS SOME CHRISTMAS CHEER WITH DECEMBER RATE CUT

By Larry Schlesinger, www.propertyobserver.com.au

The Reserve Bank has cut the cash rate to 3% today, as tipped by most economists.

The new setting is the lowest the cash rate has been since a period from April to September 2009, following the GFC.

Traditionally, the RBA is reluctant to cut rates in December, doing so at less than a third of December monetary policy meetings going back to 1990.

A 25 basis point rate cut, if passed on in full by lenders will save a borrower with a 25-year mortgage of $300,000 about $48 per month.

“The Reserve Bank has boosted consumer confidence in time for what is traditionally the most expensive season of the year. Even though rate cuts won’t be filtered through to most variable mortgage holders until January, borrowers are likely to feel more positive about spending money this Christmas," says Michelle Hutchison, spokesperson for financial comparison website RateCity.com.au. 

“Borrowers with a typical $300,000 mortgage can expect to save about $40 in monthly repayments from next month as most lenders are likely to pass on 20 basis points. But there’s a significant difference between what lenders will pass on and the interest rates they offer.

“For instance, following the last rate cut in October, lenders passed on between 4 and 25 basis points according to RateCity. Variable interest rates range from 5.4% up to 7.2%, which is worth about $352 in extra monthly repayments for a $300,000 home loan (over 30 years).

“If you have time off over Christmas, borrowers should take advantage of their spare time by finding out how much your lender passed on, what your interest rate is and how it measures up to the rest of the home loan market.”

The RBA would have taken into account a benign inflation rate, house prices flat and manufacturing sector continuing to contract at a sharp pace and flat retail sales in October.

Earlier today, the ABS reported that building approvals fell 7.8% in October, greater than expectations of a 1.6% fall.

Mortgage holders must now wait to hear over the next few days how much of the rate cut will be passed on by lenders to borrowers.

 

ANZ mortgage holders have a long wait - until Friday the 14 December - to hear if the bank will reduce its variable rates as part of its independent interest rate decision on the second Friday of every month.

Speaking to David Koch on Sunrise last week, Aussie Home Loans boss John Symond said he did not expect the banks to pass on the full rate cut, but probably 20 out of 25 basis points.

The Reserve Bank’s monetary policy committee will next meet in February – there is no meeting in January.

CENTURY 21 RESNEKOV REALTY OFFICE PROFILE

RBA PREDICTS INCREASES IN DWELLING INVESTMENT

The Reserve Bank of Australia’s head of economic analysis, Jonathan Kearns, recently gave a speech entitled ‘The Outlook for Dwelling Investment’ that provided some interesting insights into the future of Australia’s residential property market. In particular, he forecasted that ongoing demand for new housing will drive increasing dwelling investment over the coming years.

According to Mr Kearns, low vacancy rates in Australia’s rental markets are a telling indicator of the significant demand that already exists for new dwellings:

“Tightness in the rental market will generally be indicative of tightness in the overall property market. While the typical owner-occupier property will differ in many ways, there is significant interconnection between the markets for owner-occupier and rental properties,” he said.

Commenting on why these market factors have not been reflected in construction rates, Mr Kearns said that ”while the number of dwellings constructed each year hasn’t grown, the size, quality and relative cost of each dwelling has.”

Furthermore, Mr Kearns noted that developers’ exposure to risk has increased in recent times, off the back of increasing regulation and greater involvement with community infrastructure provision – an area that had traditionally resided with various levels of government

Mr Kearns concluded that dwelling investment would likely increase at a relatively moderate rate in the medium-term, supported by demands for new housing:

“So what is the outlook for dwelling investment? While the long-run decline in the average number of people per household seems to have tapered off at least partly for demographic reasons, the strong population growth in recent years and the relatively low rate of dwelling construction suggest that there is sufficient demand for housing in the economy that an increase in supply could easily be absorbed.

“Overall, it looks likely that dwelling investment will pick up at a relatively moderate rate in the medium term. How quickly and how strongly of course remain important questions for understanding the impact on the overall economy.”

41 VISTA ST GREENWICH

MARKET UPDATE

It’s been a while since my last market update so now that I have finally put pen to paper I am glad there are some positive aspects of the property market to write about.

House prices look as if they are stabilising and heading in right direction, Interest rates are at low levels and look as though they may even go lower, Auction clearance rates have improved, unemployment is low by world standards and the weather is also looking great.

Here are some of the key numbers (Source: RP Data):

• National property prices are up 1.4% for the month of September. This is the 4^th consecutive month on month increase in prices and the largest capital gain since March 2010.

• National property prices are up 0.8% since the beginning of the year and it is no surprise that it has come after the RBA has cut rates by 0.75%.

• Interest rates are almost at record low levels. The recent rate cut means the official cash rate is at 3.25% which is only 0.25% higher than GFC levels.

• Average days on market has dropped from 62 days to 58 days over the past 12 months.

• Price discounting has also dropped to 6.7% compared to 7.5% for the same time last year.

• Auction clearance rates for the past 4 or 5 weeks have been consistently over 60% which is a notable improvement on last year where clearance rates struggled to reach 50%.

• Stock levels are still on the low side and there are currently 16% fewer properties on the market compared at the moment compared to the same period last year.

• It seems that the Sydney market bottomed out in May this year after falling 5% since November 2010.

• Sydney property prices have increased by 1.5% in September.

• Over the past 12 months Sydney prices are up 0.9%. This is the first rise since June 2011.

So what does the future hold?

The simple truth is I really don’t know. Based on the numbers and my experience I feel that we have passed the worst and are entering a period of stability. Hopefully a period of stability with lower interest rates, solid Auction clearance rates should eventually lead to the market returning to a period of growth.

I am extremely keen to hear what everyone else thinks so feel free to email me with your thoughts and predictions.

Finally, as everyone is no doubt aware the end of the year is fast approaching and anyone wanting to sell before the end of the year doesn't have much time left to get their property on the market. If you are in fact thinking of selling please contact me to discuss your options.

EARLY SPRING MARKET UPDATE

SPRING SERIES - SELLING IN SPRING # 6 (FINAL)

SPRING SELLING SEASON

Buyers and vendors prepare for the start of the spring selling season…

It seems that the spring selling season is well and truly underway. 

Sydney’s Auction clearance rates for the last 2 weeks have been over 60% with clearance rate for last weekend being 63.9%, the highest it has been for many months.

Is this a sign of growing momentum in the Sydney Housing Market? Here’s what the experts had to say:

Dr Shane Oliver, chief economist with AMP Capital said that after 2 tough years he is tipping a market recovery during spring 2012

“life should be a bit better for sellers, but buyers should expect a bit more competition”

Andrew Wilson, senior economist with Australian Property Monitors says the market was “in the best overall shape for years” Sydney’s median house price has jumped 1.4% in the last 6 months.

Dr Wilson also expects the prestige market to “tick upwards” over the spring.

We had our first Spring Auction on last Saturday for an apartment in Raglan St Mosman. The Auction was attended by 35 people with 5 registered bidders and a strong auction selling well in excess of the reserve price.

Channel 10 News were also at the Auction….see the video below which was aired on the 5pm news on Saturday evening.

If you have been thinking of selling but waiting for some good news, now is the time to get your home on the market. 

SPRING SERIES - SELLING IN SPRING # 5

PHOTOGRAPHY COMPARISON - TRADITIONAL V CENTURY 21

SPRING SERIES - SELLING IN SPRING # 4

SPRING SERIES - SELLING IN SPRING # 3

SPRING SERIES - SELLING IN SPRING # 2

SPRING SERIES - SELLING IN SPRING # 1

OPEN HOME INSPECTIONS OR BY APPOINTMENT ?

NEW FIRST HOME BUYERS GRANT

PRICES FORECAST TO GROW 17% OVER NEXT 3 YEARS

If you read or listen to media reports the market seems somewhat inconsistent. It is true that overseas economic factors continue to weigh heavily on people’s minds and local issues such as the political instability, falling interest rates and unemployment also contribute to peoples buying and selling behaviours. 

Overall the statistics suggest that the market is not in a bad state but many people continue to wait for positive signs. As I have mentioned in previous newsletters it is stability that people want. The constant flow of good and bad news both locally and overseas and this protracted period of uncertainty undermines people’s confidence. 

During the first quarter of this year we saw property prices stabilising nationwide with Sydney the best performing capital city. Since then the market slowed a little, but to some degree this was to be expected as traditionally we see a drop in activity during the winter months. 

This brings me to interest rates. The official cash rate is now at its lowest since November 2009 and it looks as though the recent rate cuts will result in more sales transactions. It will be interesting to watch and see the impact of further rate cuts (if in fact there are any) 

Another interesting statistic is that nationwide investors represent 44% of the market. It seems that a softer equity market and stronger rental yields have lured many investors away from shares and into property either directly or through their self-managed super fund. 

Rental yields are the strongest we have seen for some time and RP Data reports house rents in capital cities are up 4.1% over the year to April. Also, the vacancy rate for Sydney is at a very low1.5% 

We have also seen the introduction of a new incentive scheme for first home buyers and new and off plan properties. Here are the key points as I understand them: 

• From October 1 this year, first home buyers for new or off plan properties will receive a grant of $15000, which will be reduced to $10,000 in 2014 

• From July 1 this year, first home buyers for new or off plan properties will continue to receive a full stamp duty exemption up to a purchase price of $550,000 (the threshold has increased from $500,000) and also receive reduced concessions up to a maximum purchase price of $650,000 

• From the 1st of July non-first home buyers of new or off plan properties will receive a $5,000 New Home Grant for property purchases up to $650,000 

This means that a first home buyer purchasing a new or off plan $550,000 home stands to gain $35,240 with the new grant and full stamp duty savings. There was some other good news this week. 

According to a new report by BIS Shrapnel, median prices are forecast to grow by 17% over the next 3 years. Sydney house prices are expected to grow by at least 5% per year between now and the end of 2015. 

Angie Zigomanis, BIS Shrapnel’s senior manager is of the opinion that the continued shortfall in new dwelling construction in Sydney to meet population growth means that rental growth will remain solid for the next 2 to 3 years. This deficiency will also encourage investors back into the Sydney market. 

Zigomanis says “Once there is evidence that prices have bottomed out and sentiment improves, the return of price growth will in turn promote further investor demand. After showing signs of a turnaround in 2012-13, price growth should pick up in 2013-14” 

My last point is some advice to buyers. The current market presents some exceptional opportunities. Remember, the best time to buy is when others aren’t. Markets tend to have a herd mentality and following the crowd gives people a much needed sense of security. But it is time to be brave!!! This is exactly the type of market buyers will look back on and say “I wish I bought in 2012”

CLIENT TESTIMONIALS

GOOD NEWS FOR THE PROPERTY MARKET

The Reserve Bank cut rates by 50 basis points this month. All 4 of the big banks have passed on some of the cut with NAB passing on 32 basis points, Westpac passing on 37 basis points, the CBA cutting their rates by 40 basis points and the ANZ by 37 basis points.

Has this rate cut made a difference to the property market? The answer is most definitely yes, but to what extent is not yet known. I think it will take a couple of months to see the full effect. Any changes we do see in the property market however will not be purely down to interest rates though. As I mentioned in some of my previous newsletters and blog posts all the data seems to indicate we are going through a period of stabilisation and this is further evidence of that.

I do think the rate cut will especially encourage property investors and in particular those who have had cash on deposit at the bank. With rental yields strengthening and interest earned on deposits dropping investment property has now become more attractive.

Many economists feel there is still room for further interest rate cuts down under and the Reserve Bank of Australia (RBA) could be in agreement. Although the RBA did not explicitly say that it would sanction further cuts to interest rates in its minutes released yesterday, it didn't rule it out either.

Auction clearance rates for Sydney the last two weekends were in excess of 60%, the highest we have seen for some time. Even though stock levels are at relatively low levels, as is traditional for this time of year, clearance rates are however much higher than they were for the same period last year

Jobs data has also just been released. Australia’s unemployment rate came in at 4.9% according to the Australian Bureau of Statistics, the lowest since April 2011.

The Austalian Bureau of Statistics released consumer confidence data this week which is also improving slowly, with retail sales up 1.2 per cent in March.

According to Residex, house prices rose on the lower north shore by 3.79% during the first quarter of 2012 with most of the growth taking place in March. The data for April showed a decline in house prices across all capital cities, however from my experience April is traditionally one of the months with the least number of property transactions so the data may be slightly skewed.

The Australian Dollar dropped below parity this week. Australia has become more attractive for International Buyers to invest in Australia. Over the past few years we have seen exchange rates effect the buying behaviour of overseas buyers.