Westpac’s chief economist Bill Evans has shocked the market by forecasting a series of interest rate cuts.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
As we move into the winter season, the climate for investors is very positive. Property prices are slightly softer and rental yields just keep on rising – they’re up 4.6 per cent nationally over the past six months alone, according to RP Data.
In addition, the banks are fighting hard right now for new mortgages and they’re also lending at 95 per cent LVR again, so there are many great deals available for those who want to invest.
There are a few reasons why the rental market is so tight.
We have an undersupply of property, and in addition, we’re nowhere near meeting the demands of our population growth. This is particularly so in desirable locations such as the inner and middle rings of our capital cities and along the Eastern Seaboard.
Fuelling rental demand is Gen Y’s desire for CBD and lifestyle living. Many are renting in the locations they love with no intention of buying because this usually means moving to locations where they don’t want to live (such as outer ring suburbs). Their desire for the Great Australian Dream is simply not as strong as their desire for a great lifestyle.
Other Gen Ys are renting longer to save the deposit, although things are easier now with banks once again lending up to 95 per cent LVR, so a 20 per cent deposit is not necessarily required.
In terms of demand from investors, it’s pretty strong and this is likely to continue. Latest AFG figures show 35 per cent of all new home loans nationally are for property investors.
But it’s not just mum and dad investors out there looking for the typical two bedroom apartment to invest in. We also have an increasing number of people using their self-managed super funds to buy property. Plus there’s an increasing trend in young renter-investors buying an investment property first so they can stay living (and renting) in the locations they like.
Over the year to March Quarter 2011, RP Data stats show that rents went up 5.3 per cent in Sydney; 4.5 per cent in Hobart; 4.4 per cent in Perth and 2.8 per cent in Adelaide. Canberra was up 2.5 per cent and Melbourne 0.9 per cent. Lagging behind is Darwin, down 3.7 per cent; and Brisbane, down 1 per cent.
When you drill down to the suburb level, the numbers become more interesting. Of Australia’s top performing capital city local government areas (LGAs) for rental growth, 22 out of 35 are in Sydney.
Here is a list of the Top 10 LGAs for rental growth over the year to March Quarter 2011.
- Woollahra, Sydney – Houses – 22.2 per cent to $1100 per week
- Nedlands, Perth – Houses – 20.4 per cent to $825 per week
- Burwood, Sydney – Houses – 19.6 per cent to $550 per week
- Sorell, Hobart – Apartments – 18.2 per cent to $260 per week
- Claremont, Perth – Houses – 17.2 per cent to $850 per week
- Cottesloe, Perth – Houses – 16.7 per cent to $875 per week
- East Fremantle, Perth – Houses – 16.4 per cent to $675 per week
- Ashfield, Sydney – Houses – 15.6 per cent to $520 per week
- North Sydney, Sydney – Houses – 15.3 per cent to $828 per week
- Lane Cove, Sydney – Apartments – 15 per cent to $460 per week
Source: John McGrath, McGrath Estate agents
If you are an Aussie looking for an Australian Expat Home Loan, now could be a great time to consider your options. Another major lender has relaxed their policy surrounding Expat lending and will consider investment purchases with as little as a 5% deposit. Coupled with strong rental growth in the market now is a fantastic time to consider your next move. Request an initial consult today and we will provide you with an indicative proposal to explore your buying options.
To your Australian investing success,
The Canberra property market continues to go from strength to strength, with development approvals hitting a 10 year high.
According to Collier’s International Apartment Research & Forecast Report, buyer confidence and demand have climbed in the Canberra region, off the back of low unemployment and strong economic growth.
Colliers International director of research Ariel Pollard said the average number of residential dwelling approvals in Canberra increased dramatically over the past few years with 4,805 dwellings in 2010 – up 33 per cent on the previous year.
“This suggests confidence levels in Canberra property market remain positive, and with the increase in household numbers expected to grow by 15 per cent between 2011 and 2021, the additional supply will help ease pressure on demand,” Ms Pollard said.
Colliers International research shows 16 projects are currently being marketed, while 2,128 apartments in the Inner North and South suburbs are under construction.
Source: Spionline.com.au by Matthew Sullivan
Investors appear to be taking advantage of the softer market conditions, with mortgage sales rising 18.8 per cent in May.
According to the latest AFG Mortgage Index, total mortgage volume for May was $2.5 billion – just 1.7 per cent lower than the figure recorded for May last year.
Victoria and New South Wales saw the biggest month on month upswings in mortgage volumes, increasing by 27.2 per cent and 23.3 per cent respectively.
Both states also had the highest proportion of investment loans with 38.8 per cent of loans in Victoria and 37.9 per cent of those in New South Wales, processed for investors. May also saw a surprise increase of investment loans in Queensland, up to 36.5 per cent – its highest such figure for well over a year.
AFG general manager of sales and operations Mark Hewitt said while property investment has remained at consistent levels throughout the ups and downs of the property cycle, it strengthened significantly in May.
“It is certainly a buyer’s market right now, and investors looking at rising yields are probably better insulated from the impact of rising interest rates than other types of buyers,” he said.
Refinancing remained steady at 36.8 per cent despite higher levels of competition between lenders, and the abandoning of exit fees by many. It seems that many borrowers have adopted a long term view of their lender relationship, as encouraged by AFG.
Bellevue Hill, located in the eastern suburbs of Sydney, has been identified as the best place to buy a house over the coming quarter.
According to John McGrath’s quarterly market review, suburbs just outside of Sydney’s CBD offer the greatest buying opportunities for potential home owners.
Breakfast Point, Bronte, Glebe and Haberfield rounded out the list of top five suburbs for houses.
Meanwhile, Cremorne Point, Cronulla, Kensington, Newtown and North Parramatta were identified as the top five suburbs in which to buy an apartment.
Speaking about his top suburb picks, Mr McGrath said while the residential property market had slowed considerably over the last six to 12 months, the inner city suburbs of Sydney were largely defying this trend, recording strong value growth.
As such, Mr McGrath said there were still plenty of sound buying opportunities in the market.
“It is always darkest before the dawn. It seems a lot of people are interested in buying quality property but many are standing on the sidelines looking in. Fear of a second correction has created some hesitation in sections of the market. However this is not representative of the general marketplace in high demand regions, where there is still reasonably strong buying up to $2 million for the right properties and a reasonable depth of demand above $2 million,” he said.
“Last year I predicted solid growth in 2011. While that prediction may be slightly delayed, I still feel the worst is behind us and we are at the beginning of a long term growth cycle. My best read is this will gradually move throughout the country starting in major eastern seaboard capitals and continuing for some 3-5 years.”
Investors will be the biggest driver of property activity moving forward, according to new research.
Data interpreted by Mortgage Choice found market conditions currently favour property investors who are looking to benefit from ongoing seller discounting, healthy rental income growth and longer term capital gains.
“The latest data suggests greater movement from investors taking advantage of subdued market competition and housing price reductions,” Mortgage Choice spokesperson Kristy Sheppard said.
“There are many more properties on the market than usual and less buyers to purchase them. Australians who are ready financially and keen to crack the market or build on their portfolio may find that some solid hard work sees them snap up opportune purchases while demand is low.
“Other encouraging factors are our healthy population and wage growth and low rental vacancy rates. Rents are rising at a faster pace this year while property values have steadied or dropped in many areas, so rental yields are on the increase. This all bodes well for people who research the market thoroughly, have a long-term strategy and are informed about their finance options.”
Source: Staff reporter, theadviser.com.au
‘Affordable pricing, enticing yields and a wide range of stock are luring investors to Sydney’s west, according to Starr Partners Real Estate.
Starr Partners chief executive officer Douglas Driscoll said the climate of stable interest rates, development opportunities and flourishing employment centres are drawing buyers to the western suburbs.
“Anecdotal evidence from agents across the Starr Partners network shows investors are joining first home buyers and young families in the charge to the west, spurred on by affordability, availability of stock and the continually improving infrastructure and employment levels,” he said.
Newington, Homebush, Parramatta, Merrylands, Pemulwuy and Greystanes are proving particularly popular as constantly improving infrastructure and jobs in the area underpin strong rent demand and strong rental returns.
The Macarthur region, on Sydney’s fringe, is also offering attractive investment opportunities, according to Starr Partners.
“Investors looking to enter the Campbelltown market could put a deposit of around five to 10 per cent on a property. Based on current rental yields, they could easily make their monthly repayments back from the rent alone and benefit from having a steadily appreciating asset to their name,” Elton Jardine, director at Starr Partners Campbelltown, said.
Affordability remains a key drawcard of the west, according to Starr Partners principal Phillip Starr.
Mr Starr said Starr Partners Merrylands recently sold a four bedroom home for $600,000 to an investor.
“In the city, they had trouble finding a studio for this price and yields would be much lower,” he said’
Source: Staff reporter, theadviser.com.au
It appears to be a great time for Australian Expats and Foreign Investors looking for a flexible vendor to pick up a real estate bargain.
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To your Australian property investment success,
Housing industry commentators have slammed the Federal Government for failing to address the growing housing affordability issue in its 2011 Budget.
In announcing the Budget last night, Treasurer Wayne Swan placed an emphasis on skills, training and skilled immigration, as well as improvements to allow more private investment in large public infrastructure.
While these are positive and necessary measures, HIA’s senior economist Andrew Harvey said it was disappointing to see the inadequate funding of housing infrastructure had not been addressed.
“Unfortunately, the Budget fails to deliver any dedicated policies to alleviate Australia’s chronic housing shortage, which at around 200,000 dwellings and growing, continues to place pressure on the household budgets of home buyers and renters,” he said.
“New home building activity is in danger of revisiting GFC-like levels this year, yet the Budget fails to address the excessive cost of new housing which in some instances sees more than 40 per cent of the purchase price of a new house attributable to government taxes, fees and charges.
“Until the high taxation of new housing is reduced, and supply side obstacles removed, Australian families will remain locked out of home ownership and will continue to face high rental costs. There is only one way to make serious inroads into the housing affordability crisis – and that is by substantially increasing housing supply.”
Real Estate Institute of Australia president David Airey agreed and said the Budget had done little to help Australians obtain their dream of home ownership.
“I was truly disappointed to see there were no measures in the Budget to assist those that REIA refers to as being an endangered species – first home buyers,” he said.
First home buyers currently represent approximately 15 per cent of purchasers in the housing market, compared to 30 per cent in October 2009.
“This is a market segment that desperately needs assistance to fund home purchase. REIA recommended in its Pre-Budget submission that the Government conduct a review of the First Home Owner Grant and consider providing first home buyers access to superannuation for the purchase of a home,” Mr Airey said.
“This Budget will do little to stave off expected increases in interest rates, a concern given the critical state of affordability.
“It is disappointing that the Government has not realised the value of implementing long-term solutions to address housing affordability. We need to look at practical measures to give first home buyers the opportunity to realise the dream of owning their own home.”
Source: Staff Reporter TheAdviser.com.au
|While affordability constraints continue to plague first home buyers, it seems the property market is ripe for investors.According to RP Data research analyst Cameron Kusher, the current trend of rising rental rates means investors can potential snag themselves a bargain that nets good return.
RP Data’s latest Hedonic Home Value Index found capital city home values fell 2.1 per cent in the March quarter, while weekly rental rates grew 4.6 per cent in six months.
“The market definitely favours investors over upgraders or first time buyers. If you don’t need to sell anything first to get onto the property ladder, you can potentially position yourself for some long term capital growth,” Mr Kusher told The Adviser.
“With rents on the rise, there is also the potential to find a property with good gearing – if not positive gearing.”
In one of our last articles I wrote about the current market being a buyers’ market with a lot of opportunities. This is typical where the market has softened and people selling properties are becoming more negotiable on the sale price.
What is very encouraging about this article is that rents are pushing upward which is fantastic news if you are an investor.
It may be time to research the property market and add to your investment portfolio!
To your Australian property investing success,
Mortgage holders got what they were hoping for today – a stay on interest rates.
The Reserve Bank decided to keep rates on hold at 4.75 per cent despite recent news that inflation was running higher than expected.
The official interest rate is now 4.75 per cent. Mortgage holders on variable interest rates are being charged a standard variable rate of about 7.83 per cent by their lenders.
You should always try to pay extra off your loan to give yourself a buffer in case rates do rise. You can wipe 17 months off the average new mortgage and save $30,085 in interest by paying an extra $60 per month, or about the equivalent of a 0.25 per cent rate rise.
Contact us today for a free review on your current home/investment loan.
To your success,