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.  

PERSONAL PROFILE

MARKET UPDATE - 10 MAY 2012