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”
