Viewing by month: May 2013

Master Builders predicts mixed recovery for the building and construction industry

Master Builders Australia (Master Builders) recently forecasted a mixed recovery across the three major sectors of Australia’s building and construction industry (residential building, non-residential building and engineering construction) in the three-year period to 2015-16.

Master Builders’ chief economist, Peter Jones, said “the forecast improvement in building and construction conditions is set against a background of the two speed economy with weak activity outside of mining, fiscal consolidation, poor sentiment, a high Australian dollar and the soft labour market.” 

Master Builders forecasted the value of residential building work done to improve strongly, albeit from a low base, over the next three years, following marginal growth in 2012-13. The value of residential building work done, in real terms, is expected to grow from $46.2 billion in 2012-13 to $60.9 billion in 2015-16. 

Master Builders predicted that dwelling starts will rise to 164,000 in 2013-14, 179,000 in 2014-15 and 183,000 in 2015-16.

“The stronger performing states are forecast to be Queensland, New South Wales and Western Australia. The key risks to the forecasts are frail consumer confidence, economic uncertainty, asset price volatility and ongoing softness in the labour market,” said Mr Jones. 

Non-residential building work done is predicted to decline further in real terms in 2012-13, followed by modest growth in the following years. 

“For non-residential building, [the] strongest performing states are forecast to be New South Wales, Queensland and Victoria, with industrial, retail and office building leading the way. The key headwinds and risks are poor cash flows, low margins and tough lending criteria. Investor confidence also remains low reflecting current economic conditions,” explained Mr Jones. 

Master Builders indicated that engineering construction activity would also likely remain solid, forecasting a 5.4 per cent increase in activity over 2012-13, before a 12 per cent fall-back over the following three years. 

For more information about the residential property market in your area(s) of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.


3 comments | Posted by Charles Tarbey on 31/05/2013 at 12:00 AM | Categories:

Capital city rent prices on the up

Rental rates have increased by 3.5 per cent for houses and 3.3 per cent for units across Australia’s capital cities over the 12 months to April 2013, according to recent figures from RP Data.

Across the combined capital cities, median weekly rents were recorded at $474/week for houses and $440/week for units.

RP Data’s senior research analyst, Cameron Kusher, said, “The fact that returns on investment properties [were] significantly higher than the return on cash is one of the key reasons why investors are again looking towards the housing market for investment return.”

Perth and Darwin continued to be the standout performers for rental growth performance over the period, while Canberra and Hobart saw rental growth decline. As of April 2013, house rents were most expensive in Darwin ($614/week) followed by: Sydney ($572/week), Canberra ($539/week) and Perth ($508/week). For units, rents were highest in Sydney at $498/week followed by: Darwin ($486/week), Canberra ($448/week) and Perth ($446/week).

A retrospective look at rental rates reveals that over the 15 years to April 2013, capital city rental rates increased at an average annual rate of 4.2 per cent for houses and 3.7 per cent for units. 

According to Mr Kusher, these figures suggest that rental growth in the year to April 2013 was below the longer-term average. Perth, Canberra, Sydney and Brisbane were the cities that recorded the strongest growth in annual rents over the 15 years to April 2013, while across the remaining capital cities; the annual rate of rental growth was significantly lower.

“Today’s data reveals that yields experienced a significant compression between 1997 and 2004. Since that time, there has been little overall change in gross rental yields. However, over the past few years we have some slight increases in yields for houses and units. This has occurred due to ongoing increases in rental rates at a time when home values had been declining across all capital cities,” Mr Kusher explained.

Mr Kusher concluded that “given the current economic environment and cost of housing, it [is] unlikely that gross rental yields will return to their previous levels, however, rental growth has historically been fairly moderate and if it reverts to this level throughout this period of low value growth we may see further improvement in gross rental yields over the next year.” 

For more information about the residential property market in your area(s) of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.


0 comments | Posted by Charles Tarbey on 30/05/2013 at 12:00 AM | Categories:

Dwelling finance commitments rise during March

Despite a relatively slow start to the year, the lending sector has received some welcome news with the Australian Bureau of Statistics (ABS) reporting that the total number of dwelling finance commitments rose 4.5 per cent in March, seasonally adjusted, to $22.983 billion.

Economists’ predictions for March had centred on a four per cent increase in the total number of housing finance commitments.

The fresh data showed that the number of home loans granted in March lifted a seasonally adjusted 5.2 per cent to 48,071, compared with an upwardly revised 46,225 in February. The total value of home loans lifted a seasonally adjusted 5.8 per cent. 

Loans to investors also increased over the month with the value of investment housing commitments (fixed loans) rising by 2.1 per cent in seasonally adjusted terms.

Importantly, the number of loans for new homes jumped 21.1 per cent (seasonally adjusted) during March while the number of loans for new dwelling constructions rose 4.6 per cent (seasonally adjusted). These figures suggest that the Reserve Bank’s two rate cuts in late 2012 have had a positive, albeit slightly delayed, impact in terms of stimulating mortgages and the home building market. 

It will be interesting to see how the Reserve Bank’s latest rate cut impacts on dwelling finance commitments moving forward. With the official cash rate now at a 53-year low of 2.75 per cent, and many banks having already passed on the rate cut in full, the domestic lending environment at present is certainly displaying some attractive finance options for prospective property buyers. 

 


4 comments | Posted by Charles Tarbey on 22/05/2013 at 12:00 AM | Categories:

Looking at purchasing a holiday home? Here are some key things to consider...

For investors looking to expand their portfolio and simultaneously achieve certain lifestyle benefits, a holiday home can seem a very attractive prospect. The purchase of a holiday home should, however, be a carefully considered decision, informed by a number of key market and personal factors. Chairman and Owner of Century 21 Australasia, Charles Tarbey, recently discussed the considerations that should underpin a holiday home purchase in the May edition of CENTURY 21 Wentworth’s Property Investor. We hope that you find this story an informative and enjoyable read. 

Is now a good time to buy a holiday home?

Given the current state of Australia's real estate market, some investors may be considering the benefits of adding a holiday home to their portfolio. However, the question remains - is now really the right time to do so? 

As with any investment, there are a number of key factors that should be considered before deciding whether or not to proceed with this type of acquisition. 

Holiday homes can be quite an appealing proposition given the dual purposes they can potentially serve. They can provide a family holiday destination as well as generate additional income for the owner. 

However, when deciding upon the purchase of a holiday home, an investor firstly needs to consider whether or not they can afford to finance the acquisition and fund its ongoing running costs. Lenders often have stricter criteria for holiday home investments and, as such, investors would be prudent to speak to a mortgage broker before taking the idea any further.

Furthermore, potential holiday home investors should look to have savings in place because if the economy doesn't grow they may find themselves stuck with the property, and its associated costs, for some time. Planning for various contingencies, especially low vacancy rates at different periods, will be key to making the purchase a successful one. 

The overall health of the Australian economy should also be a key consideration because, until the domestic economy fully recovers, less people are likely going to take expensive holidays. In recent years, we have seen heavy discounting of holiday accommodation on various travel and accommodation websites due to this issue. 

All that being said, holiday homes are probably about as cheap as they are going to get at present.  While there may be potential for capital growth, it's unlikely that any significant growth will be realised until consistent growth occurs in capital cities; markets that haven't fully recovered yet. 

If you believe that a holiday home is the right investment for your portfolio, and you have carefully assessed your financial position and the risks involved, there are number of property features you should look for when searching the market.

Perhaps the most important one is the location of the holiday property. Ideally, the property should be located close to an established city centre and an area of owner-occupied properties. Holiday homes that are located away from city centres are likely to be the last properties of their kind to realise capital gains. 

Mandurah in Western Australia, Hervey Bay in Queensland, Portsea in Victoria and Nelson Bay in New South Wales are areas that I believe have potential as they have good infrastructure and are in, or located close to, city centres. 

A holiday home is usually the first asset to be sold if one is looking for liquidity. The problem is often that if you have to sell, it's usually at a time in the market when few people are buying. If the buying pool has halved, you may be stuck with the asset or forced to take a price well below what you expected. 

While holiday homes can be great investments, I would be erring on the side of caution at present as I don't believe the economy has completely recovered yet.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans.


0 comments | Posted by Charles Tarbey on 20/05/2013 at 12:00 AM | Categories:

Rate cut will encourage housing market activity

CENTURY 21 believes that the decision by the Reserve Bank of Australia to reduce interest rates to 2.75 per cent will to help create an ongoing incentive for those Australians looking to purchase or refinance property. 

"At its May meeting, the Reserve Bank elected to cut the official cash rate by 25 basis points to 2.75 per cent - taking the benchmark to its lowest level in over fifty years," said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey. 

"This decision, which will come as welcome news to Australian borrowers and those in a position to purchase a property, should have a positive impact on buyer activity in the property market." 

As part of its decision, the Reserve Bank reasoned that that a further reduction in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target. 

The Reserve Bank's decision follows the recent release of RP Data-Rismark's Hedonic Home Value Index results, which showed that median home values In Australia's capital cities fell 0.5 per cent in April. 

"Despite the April decline in house prices, 2013 has so far been a very positive period for Australia's housing market with capital city dwelling values rising 2.8 per cent over the first three months of the year," concluded Charles Tarbey.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans.


5 comments | Posted by Charles Tarbey on 13/05/2013 at 12:00 AM | Categories:

Housing market softer in April after strong March quarter

According to RP Data-Rismark's Home Value Index, Australia's capital city dwelling values fell by 0.5 per cent in April after posting a solid 2.8 per cent increase over the first three months of 2013. 

The negative result for April brings the rolling quarterly movement in capital city dwelling values back to a more sustainable 1.1 per cent. Since the housing market reached a recent low point at the end of May 2012, capital city dwelling values have recovered by 4.2 per cent. 

According to RP Data's director of research, Tim Lawless, the April results represent a stumble along the path to recovery more so than a sign of a renewed trend in value falls. 

"When viewed in line with other metrics such as auction clearance rates, private treaty indicators and some improvement in housing finance demand, it is likely that the negative April result will be a blip along the path to recovery," said Mr Lawless. 

"We weren't expecting that the high rate of growth evidenced over the first three months of the year would be sustained into April. A more measured pace of growth is a much more realistic outcome for the Australian housing market, especially considering that the first quarter is typically the strongest for value growth."

Rismark CEO Ben Skilbeck added, "the quantum of the April pullback is seasonally typical of a market pause, meaning that if one were to take seasonal movements into consideration the market is not currently showing any downward trend." 

Softer capital city dwelling values were recorded across every capital city except for Adelaide where dwelling values were up 2.8 per cent over the month and in Darwin where values rose by 0.2 per cent. 

According to Mr Lawless, the April results for Adelaide should be interpreted with some caution. 

"The strong month-on-month result for Adelaide is more likely the result of natural volatility across a relatively small market rather than the any sort of sustainable surge in dwelling values over the month," Mr Lawless said. 

Across the major cities, Sydney values were down 0.4 per cent over April, while Melbourne, Brisbane and Perth saw monthly declines of 0.5 per cent, 0.7 per cent and 2.5 per cent, respectively. 

At the combined capital city level, the performances of the detached housing and the unit market have been very similar. House values have risen 2.7 per cent over the past 12 months while unit values have increased by a slightly lower 2.5 per cent.

Rental prices continue to trend higher with most cities recording an increase in rents. Across the combined capital cities, house rents were up 1.4 per cent over the three months ending April, and unit rents were up by 1.3 per cent.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans.

 


0 comments | Posted by Charles Tarbey on 09/05/2013 at 12:00 AM | Categories: