Property investors accounted for 34.1% of all mortgages arranged during February, as investors take up the slack from the dwindling number of first home owners in the property market.
And despite predictions the market will slow during the next 12 months after dramatic increases over 2009, investors are set to see long-term gains.
The data, from the latest Australian Financial Group mortgage index, shows the proportion of mortgages being taken by investors is the highest in the survey's four-year history, and a 25% increase from just six months ago in August 2009.
The survey also reveals the highest number was recorded in New South Wales, where 38.5% of all mortgages were for investors, followed by 37.2% in Victoria – the two states with some of the biggest recent price increases.
South Australia recorded 37.6%, with Western Australia and Queensland recording 29.9% and 39.5% respectively. AFG general manager of sales and operations Mark Hewitt said in a statement the activity is a surprise, and shows investors have clearly picked up the slack of first home owners leaving the market.
The AFG data shows first home owners accounted for just 11.3% of buyers, about 50% fewer than at the same point last year.
"Investor confidence has been rising for several months, but we hadn't been expecting a figure for February as strong as this one."
David Airey, chief executive of the Real Estate Institute of Australia, says the data reflects the opinion of those in the market that investors are coming back in force.
"They are streaming back into the market even since Christmas, and there has been a noticeable increase in the number of investors looking for residential property within the last month."
Airey also denies that rising interest rates and a potential slowing in price growth could scare investors away, saying the market will still provide good returns over the long-term.
"Of course performance is subject to price growth and how strong the market is, but from an investor's point of view those interest rises are tax deductable and thus they are less susceptible to that."
"As well, we see the banks are continuing to lend on residential property more so than the commercial market and speculative developments, and that is the background that will help the industry along.
Airey and Hewitt also believe investors will not be deterred by a slowing in price growth, which analysts expect due to the massive growth in 2009.
"Investors are now the driving force of the market, encouraged by rising property prices in recent months, and the longer term view that a housing shortfall will continue to underpin future price growth as well as rental yields," Hewitt said.
"I don't think they will be scared off," Airey said. "Housing is a long term investment, and there is clearly a continuous upwards trend. It's always better to say you bought housing when it was cheap but in the long term the market will take care of those issues."
The AFG data also shows second tier lending is continuing to growth, with that sector accounting for 17% of all loans, equating to more than double the amount from the same period last year.
Monday, March 22, 2010
Thursday, January 28, 2010
ANZ AUSTRALIAN PROPERTY OUTLOOK FOR 2010 AND BEYOND
The latest “Australian Property Outlook” by ANZ offers an excellent overview of where the residential property market is headed. National median house prices rose by 10% in the first 10 months of 2009, and a resilient market performance is expected this year.
Key Points:
• Population growth is at record highs, with underlying housing demand running at an annual rate of 200,000, while dwelling starts are close to record lows, with dwelling completions expected to fall to under 130,000 in 2009-10.
• The growing undersupply is placing upward pressure on prices and rents and will continue to do so for years to come. The report claims there is the possibility of a deterioration in affordability "beyond anything we have ever seen".
With the long-term fundamentals looking very positive for investors in residential property, now is an excellent time to acquire investment property.
Key Points:
• Population growth is at record highs, with underlying housing demand running at an annual rate of 200,000, while dwelling starts are close to record lows, with dwelling completions expected to fall to under 130,000 in 2009-10.
• The growing undersupply is placing upward pressure on prices and rents and will continue to do so for years to come. The report claims there is the possibility of a deterioration in affordability "beyond anything we have ever seen".
With the long-term fundamentals looking very positive for investors in residential property, now is an excellent time to acquire investment property.
Tuesday, January 19, 2010
Brisbane rent price hike tipped in 2010
Tenants may have enjoyed an easy ride in 2009 with the flatlining of Brisbane's rental market, but experts have tipped demand for rental properties will soar in 2010, along with weekly prices.
New figures published by Australian Property Monitors show 2009 recorded the weakest rental growth in eight years, with rents in Brisbane hovering around $360 a week - an increase of just 2.9 percent in median prices since 2008.
As the River City's somewhat volatile buyer's market plays catch up to Sydney's and Melbourne's fast-recovering housing trade, APM's quarterly rental report predicts median house rents in Brisbane are set to rise nearly $40 to approach $400 per week.
The rental price hike will come as potential first home-buyers relinquish their ownership dreams with the end of the first home owners' boost.
Brisbane is expected to outperform the rest of the country with at least an eight percent rebound in weekly rental prices.
Rising interest rates and tightening vacancy rates look set to combine to give landlords the upper hand once more.
The mounting demand for rental properties was realized with Australian Bureau of Statistics housing finance figures showing first home-buyers represented 22.1 percent of owner-occupier borrowers in November compared to 26 percent in October.
"It is clear that in 2009 rents were generally kept in a holding pattern as landlords and the market waited to see the end of the global financial crisis," Matthew Bell senior economist for Australia Property Monitors said.
"Although rents should rise across the board, an improving employment outlook will mean more income for renters to be able to cope with these increases in 2010."
Sydney rents are likely to increase by at least double last year's rate to approach the $500 per week for houses, continuing to outstrip other eastern capitals, while the median house rent in Melbourne is expected to rise by five to seven percent.
"However, this is just another cost on [an] already tightening budget for those Australians that did lose their jobs or were forced to move to part-time work during 2009," Mr Bell said.
"The rental increases set for the year ahead will mean many families will have to chase more affordable rentals even further from areas of potential employment."
Harcourts New Farm owner and property manager Kylie Pridham agreed the tenant's reprieve - brought about by the global financial crisis - would not last long, with vacancy rates in Brisbane to remain about three per cent.
"We have had to reduce [the rent] on some properties by $50 a week, but that won't last," Ms Pridham told the Australian Financial Review.
"As soon as the lease finishes in six months time those rents will be back up."
New figures published by Australian Property Monitors show 2009 recorded the weakest rental growth in eight years, with rents in Brisbane hovering around $360 a week - an increase of just 2.9 percent in median prices since 2008.
As the River City's somewhat volatile buyer's market plays catch up to Sydney's and Melbourne's fast-recovering housing trade, APM's quarterly rental report predicts median house rents in Brisbane are set to rise nearly $40 to approach $400 per week.
The rental price hike will come as potential first home-buyers relinquish their ownership dreams with the end of the first home owners' boost.
Brisbane is expected to outperform the rest of the country with at least an eight percent rebound in weekly rental prices.
Rising interest rates and tightening vacancy rates look set to combine to give landlords the upper hand once more.
The mounting demand for rental properties was realized with Australian Bureau of Statistics housing finance figures showing first home-buyers represented 22.1 percent of owner-occupier borrowers in November compared to 26 percent in October.
"It is clear that in 2009 rents were generally kept in a holding pattern as landlords and the market waited to see the end of the global financial crisis," Matthew Bell senior economist for Australia Property Monitors said.
"Although rents should rise across the board, an improving employment outlook will mean more income for renters to be able to cope with these increases in 2010."
Sydney rents are likely to increase by at least double last year's rate to approach the $500 per week for houses, continuing to outstrip other eastern capitals, while the median house rent in Melbourne is expected to rise by five to seven percent.
"However, this is just another cost on [an] already tightening budget for those Australians that did lose their jobs or were forced to move to part-time work during 2009," Mr Bell said.
"The rental increases set for the year ahead will mean many families will have to chase more affordable rentals even further from areas of potential employment."
Harcourts New Farm owner and property manager Kylie Pridham agreed the tenant's reprieve - brought about by the global financial crisis - would not last long, with vacancy rates in Brisbane to remain about three per cent.
"We have had to reduce [the rent] on some properties by $50 a week, but that won't last," Ms Pridham told the Australian Financial Review.
"As soon as the lease finishes in six months time those rents will be back up."
Brisbane needs Dubai-scale high rise boom
Brisbane will need an apartment building boom on the scale of Dubai if it is to accommodate a forecasted growth in population by 2030, the State Opposition claims.
The Liberal National Party's infrastructure spokesman David Gibson said the government's planning blueprint, the South East Queensland Regional Plan, was too focused on numbers and did not help local council find ways to squeeze people in.
According to the plan, a further 754,000 dwellings were needed for South East Queensland, between 2006 and 2031, with 21 per cent - or 156,000 - of those required in the Brisbane City Council area.
Mr Gibson said this piled the pressure on the Brisbane City Council to accommodate growth in a restricted space and would require a massive building rush to meet the forecasts.
"Of the new dwellings that are required in that plan about half fall to infill or medium to high rise development," Mr Gibson said.
"When you look at the Brisbane City Council area it is a lot higher than half. By memory it is about 80 percent."
The South East Queensland Regional Plan slates 138,000 of Brisbane's 156,000 new dwellings as "redevelopment or infill" around existing buildings and infrastructure.
"In the plan that looks fine," Mr Gibson said. "We need all these transit-orientated developments."
However, he estimated as many as 1725 20-storey buildings would need to be built before 2031 in order to cope.
"It is areas like Indooroopilly, Chermside, Mt Gravatt that are designated to do it," he said.
The plan also nominates the Brisbane CBD, Carindale, Toombul, Mitchelton, Wynnum Central and Toowong.
Mr Gibson said the difficulty was finding the land in these areas to build thousands more apartments.
"You go through street by street and you identify where you can build 82 new 20-storey building every year for the next 21 years and the land is not there right now," he said.
"We are not even building at that rate [now]. We would have to achieve a Dubai-scale building of apartments just to get the numbers in the South East Queensland Regional Plan achieved."
He said unless the State Government had a plan to compulsory acquire land the population figures would not be reached.
But Queensland's Infrastructure Minister Stirling Hinchliffe said the issue was more than building towers.
"Infill and higher density isn't just about towers. It's about a range of options," he told The Australian newspaper this morning.
The Liberal National Party's infrastructure spokesman David Gibson said the government's planning blueprint, the South East Queensland Regional Plan, was too focused on numbers and did not help local council find ways to squeeze people in.
According to the plan, a further 754,000 dwellings were needed for South East Queensland, between 2006 and 2031, with 21 per cent - or 156,000 - of those required in the Brisbane City Council area.
Mr Gibson said this piled the pressure on the Brisbane City Council to accommodate growth in a restricted space and would require a massive building rush to meet the forecasts.
"Of the new dwellings that are required in that plan about half fall to infill or medium to high rise development," Mr Gibson said.
"When you look at the Brisbane City Council area it is a lot higher than half. By memory it is about 80 percent."
The South East Queensland Regional Plan slates 138,000 of Brisbane's 156,000 new dwellings as "redevelopment or infill" around existing buildings and infrastructure.
"In the plan that looks fine," Mr Gibson said. "We need all these transit-orientated developments."
However, he estimated as many as 1725 20-storey buildings would need to be built before 2031 in order to cope.
"It is areas like Indooroopilly, Chermside, Mt Gravatt that are designated to do it," he said.
The plan also nominates the Brisbane CBD, Carindale, Toombul, Mitchelton, Wynnum Central and Toowong.
Mr Gibson said the difficulty was finding the land in these areas to build thousands more apartments.
"You go through street by street and you identify where you can build 82 new 20-storey building every year for the next 21 years and the land is not there right now," he said.
"We are not even building at that rate [now]. We would have to achieve a Dubai-scale building of apartments just to get the numbers in the South East Queensland Regional Plan achieved."
He said unless the State Government had a plan to compulsory acquire land the population figures would not be reached.
But Queensland's Infrastructure Minister Stirling Hinchliffe said the issue was more than building towers.
"Infill and higher density isn't just about towers. It's about a range of options," he told The Australian newspaper this morning.
Wednesday, January 13, 2010
Australian home values deliver double digit growth in 2009
Australian home prices rise by +1.1% in November with 11.3% cumulative growth in first 11 months of 2009; results driven by robust gains in Sydney (+11.6% for year) and Melbourne (+17.0% for year).
Australia’s housing market continued to grind out strong gains in the month of November with cumulative double-digit growth recorded in the year-to-date.
According to the RP Data (rpdata.com)-Rismark National Home Value Index, which is published by the RBA in the Statement on Monetary Policy, Australian home values rose by an indicative 1.1 per cent in the month of November after 1.3 percent growth in October.
Over the first 11 months of 2009, Australian home values rose by 11.3 percent following on from their modest 3.8 percent peak-to-trough falls in 2008.
The most important story of 2009 has been the extraordinary recovery in the Melbourne and Sydney housing markets. In the three months to end November, home values in Melbourne and Sydney have outperformed most other capitals rising by 4.5 percent and 3.2 percent, respectively.
Over the year-to-date, Melbourne has been Australia’s best performing capital city outside of Darwin, generating exceptional capital gains of +17.0 percent. Sydney home values have increased by more than 1 percent per month with cumulative growth of 11.6 percent.
In the first 11 months of 2009, most of the other capital cities have performed strongly with Darwin (+17.9 percent) leading the way, followed by Canberra (+10.9 percent), Brisbane (+6.9 percent), Perth (+6.5 percent) and Adelaide (+5.7 percent).
Expert thoughts
According to Christopher Joye, managing director of Rismark International, “At the end of 2008 most forecasters were predicting substantial house price falls in the following 12 months. Almost all of them were proven wrong. Australia’s housing market has surprised on the upside with impressive double-digit capital gains in the year-to-date. The inability of most analysts to get close to divining Australia’s housing market trajectory during the GFC and in the recovery since, combined with the many misconceptions one typically hears about housing, illustrates just how poorly understood the sector is.”
Rpdata.com Research Director Tim Lawless suggests that the November results highlight that the Australian market may be less sensitive to interest rate rises and the removal of Government stimulus than many would have thought.
“The strong November results were achieved despite the 25 basis point lifts in the official cash rate in October and November as well as the wind back of the boost to the First Home Owners Grant which was halved on the first of October. First home buyers have been trending down since peaking in May ’09 and the gap is being filled by upgraders and investors who are much less sensitive to rate rises and the level of stimulus.”
Christopher Joye said, “First time buyers have been fading from the market and the withdrawal of the boost has yet to have any discernible impact on price growth. The key driver of Australian housing demand in the latter half of the year appears to have been upgraders and investors. We expect this trend to continue in 2010.”
He said that as mortgage rates normalise to around 7-8 per cent, house price growth will taper back to more modest single-digit levels in 2010. Since many borrowers did not reduce their mortgage repayments in 2008-09 when the RBA cut rates by circa 40 per cent, household balance-sheets should be well positioned to absorb higher costs.”
Rpdata.com’s Tim Lawless agreed stating that value growth in Australia’s residential sector is likely to be more subdued than what was recorded in 2009, “2009 has been both an exceptional and surprising year for Australia’s property market.”
“Looking forward we would expect market conditions to moderate into 2010 as interest rates continue move back to a neutral setting and the remainder of the Government stimulus is rolled back. The primary driver of growth will continue to be an under supply of housing coupled with extraordinary housing demand fuelled by population growth,” he said.
Market dynamics
The median Australian home price in all capital cities over the three months to end November was $439,800 (including houses and units). If we include all regions across Australia (i.e. not just the circa 40 percent of homes located in capital cities), the national median dwelling price is $395,000. (Note: that these are the ‘middle value’ or 50th percentile median prices based on the pooled sales over the last three months.)
The median Australian house price in capital cities is $470,000 while the median unit price is $390,000.
The most expensive houses, based on median price, are in Sydney ($550,000), followed by Canberra ($535,000), Darwin ($501,000), Melbourne ($486,400), Perth ($485,000), Brisbane ($449,850), Adelaide ($372,000) and Hobart ($330,000).
Sydney has the most expensive unit market with a median price of ($417,000). This is followed by Melbourne ($402,500), Canberra ($390,000), Perth ($385,000), Brisbane ($375,000), Darwin ($357,000), Adelaide ($310,000) and Hobart ($270,750).
In the month of November, detached houses (+1.0 percent) have underperformed units (+1.3 percent).
Over the three months to end November, unit values (+3.1 percent) have also shaded houses (+2.9 percent).
And in the year-to-date, units (+12.5 percent) have materially outperformed houses (+10.9 percent) presumably due to the influence of the first time buyers’ boost.
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