Viewing by month: December 2013

Looking forward: The Australian property market in 2014

 

2013 will be remembered as an exciting year for real estate in Australia, with prices experiencing a significant recovery and interest rates being cut significantly by the Reserve Bank of Australia. In light of this I have decided to share this story from Century 21’s Chairman and Owner, Charles Tarbey, with his thoughts on the recovery, interest rates and the removal of red tape in this article from the December edition of Property Investor.

THE AUSTRALIAN PROPERTY MARKET

Over the past twelve months the Australian property market has experienced a significant recovery from the trough that prices hit in May 2012. I believe that this recovery was driven in part by the price expectations of sellers.

In some instances, the high price expectations put forward by sellers has resulted in buyers paying what may seem like more than a property is worth. However, it's worth remembering that real estate is a long-term game and if you pay a little bit more for a property it shouldn't matter - so long as you are willing to hold on to the property in order to realise eventual capital gains.

With this being said, the property market in 2014 will again be driven by different trends and I've outlined some factors below which may define the year ahead.

INTEREST RATES

I'm concerned that interest rates may be too low in 2014 and while this may seem like an odd assertion, I believe that the rate should sit around 4-4.5 per cent to sustain stable growth in the property market.

If consumer interest rates were to move a little higher, this should provide a safe, stable market; slowing the current elevated interest in real estate and in turn helping to prevent the risk of a bubble occurring. By providing a safe, stable environment, the market will return to a point where buyers and sellers are negotiating prices and these discussions are not primarily driven by seller's expectations.

You may hear younger real estate professionals excitedly discussing the potential for a boom spurred on by future rate cuts. Conversely, experienced real estate professionals will likely welcome a decision by the Reserve Bank to raise interest rates, as they recognise that a property boom is a disruption to the steady flow of business and asset growth.

A TALE OF TWO MARKETS

While nearly all of Australia's capital cities have experienced price growth over 2013, it's worth remembering that this has been concentrated across three main capital cities - Sydney, Perth and Melbourne. Over the past twelve months, price growth in the other capital cities hasn't reached levels higher than 2.8 per cent year-on-year and in the case of Hobart, even declined over the same period.

This price growth should start to spread out over the coming year, as a result of people who are looking to unlock capital gains from their homes in areas that have seen substantial price growth and perhaps use this gain to move to remote or coastal areas.

Perth and Sydney are also the only individual capital city markets in which home values are now higher than they were at their previous peak and this highlights that the current recovery may have some steam left in it yet.

THE REMOVAL OF RED TAPE

In my opinion, Adelaide is the only capital city in Australia that currently has enough housing stock to meet immigration demand and population growth. All of the other capital cities seem to be lagging behind, primarily because of an excess of red tape forced onto developers trying to get projects off the ground.

In my experience, these developments are being stalled, or even stopped completely, due to this excess of red tape - not at a state level, but at a local council level. The amount of time and money spent dealing with red tape across Australia can be very challenging - in some areas of Sydney, developers will lodge their development application and lodge an application to the land and environment court at the same time.

The development of more medium density housing is essential if we are to be able to meet the present and future demand for housing in Australia's capital cities. The stark reality is that cities like Sydney, Melbourne and Perth will become victims of their own success if people move away because prices are driven too high by excess demand.

It's important that this situation is remedied as it's likely the only way to meet the projected demand for housing and in turn, ensure that future price growth is stable and steady.

I believe that 2014 will be a prosperous year for the Australian property market, particularly for secondary markets that may have missed out on price growth in 2013.

Buyers and sellers alike would be wise to ensure they take time to properly research their local markets and make investment decisions with long-term growth in mind.


0 comments | Posted by Charles Tarbey on 22/12/2013 at 12:00 AM | Categories:

Charles Tarbey: Australian property market isn’t in a boom

 

Century 21 believes recent speculation that the property market is in a boom phase is unfounded and the market could be seen more as in a recovery, and only in selected areas.

“Despite the combined capital city index recording its fastest rate of annual growth since October 2010, Sydney and Perth are the only markets where values now sit higher than they were at their previous peak,” said Chairman and Owner of Century 21 Australasia, Charles Tarbey.

“Claims that the Australian property market is in a boom or a bubble will likely prove to be incorrect.”

The recently released RP Data-Rismark Hedonic Home Value Index results saw capital city dwelling values increase by 0.1 per cent during November and 8.3 per cent so far this year, slowing after a period of rapid growth.

“The recovery has been driven by sellers who are listing their properties at high prices and buyers who appear to be willing to meeting their marks,” said Charles Tarbey.

“The recovery that the market has experienced over spring is just that – a recovery, not a boom,” concluded Charles Tarbey.


0 comments | Posted by Charles Tarbey on 21/12/2013 at 12:00 AM | Categories:

Home values edge higher

Home values edged higher by 0.1 per cent in November, according to the latest RP Data-Rismark Hedonic Home Value Index, with combined capital city home values rising by 8.3 per cent so far this year.

 

RP Data’s Senior Research Analyst Cameron Kusher noted that the slowing rate of capital city home value growth indicates a potential moderation in overall growth.

 

Sydney and Melbourne recorded relatively strong levels of annual value growth and are up 12.5 per cent and 6.6 per cent respectively over the last 12 months. However, over the past couple of months, the monthly rate of growth in both cities has begun to slow.

 

Mr Kusher commented that while further growth is likely for this cycle, it may be the case that the peak rate of value growth in both cities has now passed.

 

Over the three months to November 2013, home values increased across each capital city except for Hobart (-4.7 per cent) and Canberra (-3.5 per cent). Mr Kusher said that rising home values are becoming more broad-based rather than just being focused across a handful of capital city markets. Values increased by 5.8 per cent in Sydney, 1.5 per cent in Melbourne, 1.1 per cent in Brisbane, 2.6 per cent in Adelaide, 2.5 per cent in Perth and 1.8 per cent in Darwin.

 

According to RP Data, although home values are generally trending higher across the capital cities, Sydney and Perth are still the only individual capital city markets in which home values are now higher than they were at their previous peak.

 

“The latest data from the Reserve Bank shows private sector housing credit increased by 5.0 per cent over the 12 months to October 2013, its highest annual rate of growth since June 2012. The data also indicates that housing credit for investment housing (6.4% pa) is expanding at a much faster pace than owner occupier finance (4.3% pa),” Mr Kusher said.

 

A typical capital city home is currently taking 41 days to sell compared to 50 days a year ago and homes are being discounted by 5.8 per cent currently compared to 6.6 per cent a year ago.


0 comments | Posted by Charles Tarbey on 18/12/2013 at 12:00 AM | Categories:

Stronger showing for new home lending in October

The most recent housing finance data released by the ABS shows a healthy result for construction lending in October.

According to the Housing Industry Association (HIA) the number of loans advanced for owner occupiers to construct new homes is at its highest level since March 2010, additionally, the upward momentum for new investment property lending is continuing.

“The dual growth evident for lending for construction across both owner occupiers and investors is a good sign for new home building activity in early 2014,” said HIA Chief Economist, Harley Dale.

“Six out of eight states and territories contributed to the growth in construction lending for owner occupiers.

“This is an important tick in the box for the residential construction outlook as the first round new home building recovery in 2012/13 was narrowly driven with only two states – New South Wales and Western Australia – accounting for the bulk of the growth.”

The ABS results for October 2013 showed a 1.0 per cent increase in the total number of owner occupier housing loans and loans for construction increased by 1.0 per cent. Loans for the purchase of a new dwelling increased by 3.6 per cent and loans for established dwellings (net of refinancing) increased by 2.0 per cent.


0 comments | Posted by Charles Tarbey on 17/12/2013 at 12:00 AM | Categories:

Housing report card signals brighter year ahead

The Housing Industry Association has released the Spring 2013 edition of its National Outlook housing report card. The card highlights higher levels of new dwelling commencements and steady recovery in renovations investment from a ten year low.

“The improving level of dwelling commencements achieved in 2012/13 will be consolidated this year before moving up a further leg in 2014/15,” commented HIA Senior Economist, Shane Garrett.

“Meanwhile, renovations investment is expected to grow in a majority of states and territories after falling to a ten year low during 2012/13,” added Shane Garrett.

“Growth in housing starts during 2013/14 will be concentrated in large states like NSW, Queensland and WA,” noted Shane Garrett. “Growth in renovations will be much more broad-based, with increases occurring across most states.”

“Looking further ahead, we see dwelling commencements lifting above the 170,000 per year mark by 2016/17, matching the highs achieved during the post-GFC stimulus,” remarked Shane Garrett.

“Over this timeframe, renovations activity is also likely to increase steadily, reaching $30.3 billion by 2017/18.”

“Record low interest rates and strong population growth is driving increased demand for housing. In this context, it is absolutely crucial that planning reforms and infrastructure delivery facilitate the requisite supply of new housing. There currently exist many bottlenecks around land supply, infrastructure and the time taken to achieve planning approval for new dwellings. It is important that both federal and state governments address these obstacles and work with the housing industry in delivering a sufficient supply of affordable housing,” concluded Shane Garrett.


0 comments | Posted by Charles Tarbey on 09/12/2013 at 12:00 AM | Categories:

HIA: RBA signals steady rates as policy reform needs priority attention

The Reserve Bank of Australia announced their decision to keep interest rates on hold at 2.5 per cent for a fourth consecutive month in December.

“Following the last interest rate cut in August it became increasingly evident that the RBA was done for the year; and so that has proven to be the case,” said Housing Industry Australia Chief Economist, Dr Harley Dale.

“Australia’s rebalancing act with economic growth is only at a nascent stage and the RBA needs to stand ready to lower interest rates further if the economy lacks momentum heading into 2014,” remarked Harley Dale.

“The residential construction industry can be a key driver of the rebalancing of growth given the large reach that new home building and renovations activity has into wider areas of the economy, most notably retail and manufacturing. A modest first stage recovery is underway in new housing, aided considerably by very low interest rates, but there is a long way to go to achieve healthy construction levels,” noted Harley Dale. “Meanwhile renovations activity has yet to lift itself from a ten year low.”

“For residential construction to play its traditional lead role in an economic up-cycle there will need to be a Federal government-led focus on reforming the inefficient and excessive taxation and regulation of new housing, together with a solution found to the lack of readily available finance for residential development which continues to constrain industry activity,” concluded Harley Dale.


0 comments | Posted by Charles Tarbey on 06/12/2013 at 12:00 AM | Categories:

ABS: Mortgage repayments on the rise

Between 2006 and 2011, median monthly mortgage repayments in Australia climbed 38.5 per cent, from $1,300 to $1,800 according to data released today by the Australian Bureau of Statistics (ABS).

"Between 2006 and 2011 mortgage costs increased more than wages; the median weekly household income increased by 20.2 per cent, compared to an increase of 38.5 per cent in mortgage repayments," said ABS Director of Rural and Regional Statistics, Lisa Conolly.

The most expensive mortgage repayment of all Local Government Areas (LGA) in Australia in 2011 was Woollahra, in Sydney's eastern suburbs, with a median monthly mortgage repayment of $3,250, compared to the rest of New South Wales at $1,933.

The fastest increase in a median monthly mortgage repayment was recorded in Ashburton in Western Australia which increased by 278.6 per cent compared to 2006.

Analysing the growth in median mortgage repayments in regions is complex. There are a range of factors that influence how mortgage costs in regions change, including local economic circumstances, regional housing supply and demand, age of the mortgages and the stage of life of the local population.

"Regions, such as Ashburton and Port Hedland in Western Australia, have experienced high population growth and turnover, meaning that there would be increased demand for housing in these regions, and possibly new home owners with new mortgages," said Ms Conolly.

The fastest growing mortgage costs were seen in LGAs outside the capital cities.


0 comments | Posted by Charles Tarbey on 03/12/2013 at 12:00 AM | Categories:

Century 21 website attracts record amount of online traffic

 

Century 21 Australia recorded the highest number of unique visitors to the company’s website in its history during the month of October, reflecting growing activity in the property market and the ongoing digitalisation of the real estate group.

The number of unique visitors to Century 21’s Australian website was 27 per cent greater in October 2013 compared to the same month in 2012 and attracted 85 per cent more visitors from mobile devices when comparing the same periods.

“These results reflect the ongoing strengthening of the Australian property market, the global presence of the Century 21 real estate network, and growing international interest in Australian property,” said Chairman and Owner of Century 21 Australasia, Charles Tarbey.

“The growing trend of consumers searching for property information through tablets and mobile devices emphasises the importance of real estate groups being ‘mobile ready’ in order to promote properties to the largest possible buyer pool.”

As part of its ‘mobile ready’ strategy, Century 21 recently introduced affordable video listings with voice over to its network. These videos are believed to have contributed to the increase in mobile traffic over the past year.

“This trend is only going to continue and Australians thinking about selling their home would be prudent to ensure their property can be viewed through these new technologies and is adequately promoted online,” said Charles Tarbey.

Century 21 Australia has invested record sums over the past five years into Search Engine Optimisation (SEO), social media strategies, Apps, media engagement, online real estate games and the optimisation of web content for mobile devices.

The strategy is aimed at ensuring the group and its offices remain highly visible and active in the online arena in order to attract a growing number of customers that may be exploring real estate online.

“Investment into online technologies and marketing is as important to selling a house these days as planting a physical ‘For Sale’ sign in front of a property,” continued Charles Tarbey.

"Century 21 believes it has established a strong online foundation for its offices to benefit off as the market continues to strengthen and consumers increasingly look online to buy and sell real estate,” concluded Charles Tarbey.

 


0 comments | Posted by Charles Tarbey on 02/12/2013 at 12:00 AM | Categories: