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Tuesday, May 14, 2013
The latest monthly report released by RP Data shows a slight decline in home values over the month of April. Home values nationally fell by 0.5 per cent following a 2.8 per cent increase over the March quarter.
State-by-state across the majors, the numbers went like this: Sydney down 0.4 per cent; Melbourne down 0.5 per cent; Brisbane down 0.7 per cent; Perth down 2.5 per cent and Canberra down 0.6 per cent.
The fact is, this is just a blip. There’s two things to consider here. Firstly, the seasonal influence. Easter and school holidays always have an impact on the market. Secondly, recoveries do not occur in a straight line. I’ve been in this business for over 30 years, I’ve been through several recoveries and blips like this happen every time. In fact they are healthy for market stabilisation.
It’s important to look at the big picture, as there’s loads of evidence that we are at the start of a new cycle of growth. Here’s 10 points to consider:
- Clearance rates have improved significantly. In Sydney, the clearance rate has been above 70 per cent for 10 out of the 13 auction weekends we’ve had so far. This time last year, Sydney had a clearance rate of around 50 per cent (Australian Property Monitors)
- The number of mortgages processed in April by Australia’s largest broker, AFG, was 40 per cent higher than in April 2012. This shakes out to be about $1 billion more in new loans. This is the company’s largest ever volume since their Mortgage Index began in 2004
- The Reserve Bank has reduced interest rates again to the lowest level in our history. The latest 0.25 per cent cut was immediately passed on by many of the major banks and smaller institutions
- Consumer confidence is rising, properties are selling in a shorter timeframe and buyers and sellers are increasingly finding common ground re pricing
- Sales volumes are higher as more and more buyers re-enter the market
- The proportion of investors in the market is very high, indicating a strong sense of opportunity. In NSW, AFG data shows close to 1 in 2 new loans are for investors
- Rents continue to rise, with RP Data reporting capital city house rents up 1.4 per cent for the three months ending April and apartment rents up 1.3 per cent
- The stock market continues to gain strength and is sitting above the 5,200 mark. Portfolios that were seriously damaged during the GFC years are being replenished now, giving investors new options
- The number of self-managed super funds (SMSFs) in Australia is increasing and more people are choosing to purchase property with their money
- The recent sale of Altona, Sydney’s renowned harbourfront mansion in Point Piper for a reported $54M to a Chinese-born executive from Melbourne is further evidence of a recovering prestige sector. The prestige market has been soft for many years but it’s slowly turning around now. Chinese buyers are going to be a major factor in this recovery. The first application under the ‘significant investor visa’ was approved this month. The visa enables wealthy foreigners to invest at least $5M in approved assets in order to gain fast-tracked permanent residency. More than 200 applications have been lodged since the visa was introduced in November last year
Right now, there is so much opportunity in real estate for buyers and sellers alike. Be proactive, look at your finances and work out how you can best take advantage of everything today’s market offers.
Tuesday, May 07, 2013
People often ask me what’s going to happen in the property market next. I’m happy to share my thoughts and observations, but another way is to simply take a look at the key indicators of the economy.
Of course, the economy isn’t the only thing affecting the market. For example, the market is also affected by social trends, such as the aging population and more people living alone creating higher demand for apartments. Government incentives such as the First Home Owners Grant can also have a big impact. But the fundamental driver of the property market is the economy.
Why is this the case? Because property is an expensive item and people are not about to make major financial commitments when they’re worried about the economy. So here’s a list of economic indicators to watch.
- GDP – GDP indicates our economic production as a nation, and on a per capita basis, it’s a useful indicator of our standard of living. A growing GDP creates a flow on effect to property because people will generally look to improve their standard of living as their incomes grow.
- Confidence – Demand for property always drops when people are lacking confidence. Check out the monthly Westpac-Melbourne Institute Consumer Index to get a snapshot of market mood. (The equilibrium is 100.) Business confidence is equally important. When business is suffering, they stop hiring, reduce costs and even reduce prices, thereby resulting in lesser profits. They focus on the bottom line rather than further investment or expansion. When business contracts, so does the broader economy, affecting job stability and incomes.
- Inflation/cost of living – Inflation or CPI gives us an idea of demand and cost of living. The Reserve Bank has a target of 2-3 per cent and factors any movements either side of this into its monthly decision on interest rates. When inflation and cost of living pressures are high, people batten down the hatches and put off all kind of spending decisions, instead choosing to save. Real estate takes a direct hit because without buyers, properties don’t sell!
- Employment – Jobs are crucial to a stable property market. Nothing will disturb the market more than high or rising unemployment. Without jobs, people can’t pay their rents or mortgages and this can result in increased mortgagee sales and falling prices.
- Interest rates – Nothing will stimulate a property market more than falling interest rates. This is because mortgages tend to be the biggest expense of a household, so when rates go down, households can save significant dollars or buy more property with cheaper finance.
- Household wealth – Strong or increasing household wealth usually makes people want to upgrade their lifestyles with a bigger house or a better location. There are three main ways to increase wealth – get a pay rise, save or invest. Following the GFC, saving was the preferred avenue to wealth and debt reduction was the primary aim of most households. By the end of 2012, we were saving about 10 per cent of our incomes and our average loan-to-value ratio was just 50 per cent. Now people are starting to invest again, with almost 1 in 2 new loans in NSW going to investors at the start of 2013.
By no means is this an exhaustive list. But if you want to do a health check on the Australian property market, at any given time, then these are the economic indicators to watch.
Tuesday, April 30, 2013
Even though auctions represent a small percentage of sales, auction clearance rates give us a highly accurate week-to-week idea of market sentiment. Other sales data usually has a significant lag to it but I always feel that clearance rates are an immediate market barometer.
Generally speaking, a clearance rate above 80 per cent indicates boom time conditions while 60 per cent represents a pretty normal market. In 2013, we’ve seen Sydney’s clearance rate go above 70 per cent and pretty much stay there week after week.
This is great to see. It’s clear evidence that buyers and sellers are on the same page when it comes to prices and stock is selling pretty quickly right now. According to McGrath figures, it’s homes in the $750,000 to $1.5M price bracket that are attracting the most competition and this is mostly representative of couples and families upgrading to larger homes. This past Saturday we achieved a 70 per cent auction clearance for properties in this price category and the previous Saturday, a very high 81 per cent.
Now, while we might celebrate a clearance rate above 70 per cent or 80 per cent, we need to keep in mind the 20-30 per cent of properties that don’t sell and what happens next in those cases.
Not getting a sale on auction day is among many vendors’ worst nightmares – but it really shouldn’t be. The auction itself is just one of four opportunities to sell during an auction campaign, that is – before auction; under the hammer; immediately after auction; or later.
An auction campaign simply unearths the best buyers in the market at that particular point in time. There are numerous reasons why a property might not sell at auction and many of them have nothing to do with the quality of the property itself. Here’s a few:
- The property is priced too high
- The market is fragile or there is an oversupply of similar properties
- The agent hasn’t done a good job marketing the property; or the vendor has a very limited marketing budget
- The best buyer or buyers might not be ready to bid on the day, perhaps due to issues with finance or personal circumstances
- Some buyers might not enter the market until late in the campaign, so they might not have time to get a pest and building report done on your property
- Their own home might be scheduled to go to auction after yours and they don’t want to buy before they sell
Having sold thousands of properties at auction myself, obviously I’ve had to pass in a number of those. But I’ve never found selling a property after auction to be an issue. From my experience, most properties passed in at auction usually sell within 7-10 days.
Here’s what happens when your property passes in:
- The highest bidder will usually be offered the first right to negotiate and this will take place immediately after the auction. If the auction has been properly conducted and the property was priced correctly, there is usually not a huge gap between the highest bid and the reserve
- If a sale does not occur, a good agent will go back to all the buyers over the next few days and try to negotiate a higher price
- If a sale still doesn’t occur, it’s important to remember that fresh buyers are coming onto the market every week and one of them could be the buyer you’re waiting for
If you’re planning to sell via auction and you’re feeling nervous, talk to your agent. They’ve done this a thousand times and a good agent will take the time to coach you through it.
Right now, the market is really firing so there’s every chance you’ll get a great result on the day if your expectations are reasonable. Good luck!
Tuesday, April 23, 2013
The property choices Australians make are increasingly driven by lifestyle. For example, in Sydney’s Eastern Suburbs, it is not uncommon to see a premium being paid for properties that are a short walk to the beach versus those that are a few suburbs away from the water.
On the Upper North Shore, family buyers are likely to pay more to be within a particular school catchment area or within walking distance to the train station for a quick commute to work.
And with our burgeoning café culture, pretty much everyone wants to be able to walk to local eateries where they can catch up with friends or enjoy some time to themselves over a great cappuccino.
While affordability will always be a factor in our property decisions, lifestyle is the fundamental key in our marketplace today. One of the strongest trends right now is the desire for the ‘café lifestyle’.
Time-poor Australians are spending more and more time in cafes. They’re our favourite place for catch-ups with friends, casual business meetings or simply some time to ourselves over a great cappuccino. We love the buzzy atmosphere and eclectic styles of our local cafes, we enjoy getting to know the owners and soon enough we have a “usual” order at one or two favourite spots.
There’s even statistics proving how much we love our growing coffee scene. A recent article in The Daily Telegraph quoted research from Roy Morgan that shows since 2008, Australians have recorded an extra 10 million visits to cafes during any given three-month period, up 25 per cent!
Leading the trend are the over 65s, who are visiting cafes almost twice as much as in 2008, and the under 25s who have increased their visits from four million to almost six million per three months.
Given the strength of this trend, it’s no wonder that properties within walking distance of the local café village are increasingly on buyers’ ‘must have’ lists. I think this is particularly so among buyers living on their own in smaller properties. Living alone is a growing trend in Australia and the opportunity to stroll up the road to visit their favourite café for a coffee or a meal is particularly important to them.
In our Sydney and Brisbane McGrath Market Reports, we highlighted both cities’ emerging network of café villages. Some of the best and most sought-after by buyers are listed here:
- Lane Cove
- Elizabeth Bay/Potts Point
- Mosman/Neutral Bay
- Bondi Beach
- Surry Hills/Redfern
- The Valley
- Kelvin Grove
- Ascot & Hamilton
- New Farm
- Bulimba & Bayside
- South Bank
- West End
- Toowong/St Lucia/Chapel Hill
The best thing about the café lifestyle is that it’s so accessible. Compare it to ultimate Australian dream of living close to the beach. Many of us would like to have that but not all of us can afford it and it’s also not practical for people working in the middle to outer suburbs of our cities. But you can find the café lifestyle anywhere because these days there’s a café village in almost every suburb.
If the café lifestyle is important to you, have a look at McGrath’s Lifestyle Property Search on our website which enables you to search for properties that are ‘Surrounded by lots of cafes and restaurants’.
The whole point of the Lifestyle Search is to enable buyers to search for properties not by area but by lifestyle amenities. We’ve found that buyers are increasingly open to new areas of their city as long as they offer the same lifestyle they currently enjoy.
Our Lifestyle Search offers many other options, such as ‘Short walk to the beach’; ‘Near a train station’; ‘Single level house’; ‘Waterfront’ and ‘Over 55s’. Check it out at www.mcgrath.com.au.
Tuesday, April 16, 2013
Recently released RP Data statistics for the March quarter show Australia’s capital cities recorded the highest capital gains we’ve seen since May 2010.
With the exception of Adelaide, which dropped 0.5 per cent, every capital recorded some kind of gain over the quarter with Hobart in the lead at 6.1 per cent followed by Perth 4.3 per cent, Canberra 3.8 per cent, Sydney 3.4 per cent, Melbourne 2.5 per cent and Brisbane 1.9 per cent.
Overall, this is very encouraging news and a great start to the year.
Let’s look at Sydney. Growth of 3.4 per cent might not sound like much, but if Sydney maintains this for the next three quarters, we’ll have a compounding median price rise of at least 13.6 per cent by year’s end. So a house that traded for $500,000 in January could be worth $568,000 by Christmas. I’m not suggesting that we want to see rapid rises in prices, but consistent growth is healthy for the market.
I make this particular point because we’ve seen a serious decline in first home buying in NSW recently and yet conditions for young buyers haven’t been this good in a long time. Young people need to realise that today’s interest rates combined with the market uptick present ideal conditions for them to make that crucial first purchase now and enjoy some immediate capital growth in 2013.
Anyway, back to the stats. RP Data analysts note that low interest rates have spurred on the investor market more so than the owner-occupier market. Latest figures from Australia’s largest mortgage broker, AFG, show almost one in two buyers in NSW are investors and that is a huge percentage.
As you know, income alone is not going to fund most people’s retirements. If you want to be comfortable in your later years you’ve got to invest now. I really applaud all those people out there now looking for their next investment. Many of them will end up neutral, positive or only slightly negatively-geared given today’s interest rates – even if they’re buying in a capital city.
The RP Data quarterly report shows rental yields are highest in Darwin, where you can get 6 per cent on a house or 6.3 per cent on an apartment. That is an exceptional average. Apartment yields are usually higher than houses, and right now they’re a very healthy 5 per cent or more in six of the eight capital cities – Sydney, Perth, Canberra, Brisbane, Darwin and Hobart.
I think one of the greatest changes in the March quarter that has affected the market is the stabilisation of interest rates. The official cash rate is at a record low 3 per cent and the Reserve Bank has left it unchanged for three consecutive months now. The banks are also holding firm on their incredibly low fixed rate loans, with no more changes likely in the short term.
This stabilisation has convinced many buyers and sellers that the cost of money is not going to get much lower so there’s no point waiting on the sidelines of the market any longer.
According to AFG, almost one in three new borrowers nationally are taking up fixed rate loans and that’s the highest proportion they’ve seen in the 10 years they’ve been producing their Mortgage Index report. It shows that most people believe interest rates are as good as they’re going to get.
This is a fantastic time to be in the market – whether you’re a buyer or a seller. There is so much opportunity available right now for people willing to back themselves and invest for their futures. Good luck out there and let’s look forward to some more positive numbers in the June quarter!
Tuesday, April 09, 2013
Before the GFC, most Australians were living the high life with debt-laden credit cards and highly leveraged investments. As the mining boom spread an extraordinary level of wealth amongst the masses, more people were indulging in expensive cars, bigger houses and all the finer things in life.
Then it all changed. The GFC happened and our attitude to debt essentially did a 180 overnight.
Over the past five years, Australians have been very focused on paying off debt. In terms of home loans, many people have continued repaying the same amount despite the reduction in interest rates. So much so that the Reserve Bank estimates that borrowers are now about 21 months ahead with their repayments on their loans, creating a lot of new equity.
So where to from here? Are we going to remain savers or will we start spending again?
Now that we’re starting to see a change in the global economy, combined with record low interest rates and a major share market surge, the signs are that Australians are starting to spend again – cautiously.
While it’s important not to forget the lessons of the GFC, I think we have a great opportunity before us to invest and build wealth for the future in the property market.
The old tradition of working hard all your life to pay off your one home has passed. People are realising that in order to live comfortably in retirement – a far longer period of life than ever before, we need to invest earlier in our lives to produce future wealth.
And what a time to do it! We’re already passed the bottom of the cycle in major markets like Sydney and Brisbane, so time is running out to take advantage of good value.
Many investors are realising that today’s market represents the perfect investor climate. Vacancy rates are low, rents are strong, affordability is good and you can lock in a home loan below 5 per cent for two years or below 6 per cent for up to 5 years or more. The country’s biggest mortgage broker, AFG reports that just under 30 per cent of borrowers in March selected a fixed loan – the highest number since AFG began producing its monthly index 10 years ago.
AFG also reports that an extraordinary 47.4 per cent of new borrowers in NSW in March were investors. But interestingly, they’re not necessarily using the equity they’ve gained through paying down debt to purchase today.
Alan Hemmings, the new General Manager of our mortgage broking division, Oxygen Home Loans, says the trend in buying through self-managed super may explain why such a high level of investor activity is not making a dent in people’s personal equity. This is great – but if people were to use both their super and their extra equity today, they could purchase 2 or 3 properties and really put themselves in front, as long as the repayments were affordable.
My advice? Don’t miss a fantastic opportunity to generate future wealth because you got burned in the GFC. Make sensible decisions and definitely keep a buffer in your budget for future interest rate rises, but go into the market with confidence today.
Tuesday, April 02, 2013
It’s such a shame to see first home buying slump to such low levels in NSW and QLD since the scrapping of the $7000 grants for established properties last October. As you know, these grants were replaced by incentives for purchasing new or off-the-plan in an effort to generate activity in the housing construction sector.
It’s not a bad plan because in theory, the grants should stimulate the housing sector and create jobs, which is great for the economy; and an increase in new housing would go some way to addressing the major undersupply we have in this country.
Problem is, most people want to buy existing or ‘established’ properties because in most cases they are closer to the cities and beaches, which is where most people want to live – especially Gen Yers. So the response to the loss of the $7000 grant has been a significant exit of first home buyers in the NSW and QLD markets.
Just look at the latest stats. According to Australia’s largest mortgage broker, AFG, first home purchasing has dropped dramatically to 4.5 per cent in NSW and 6.4 per cent in QLD, well off the long term average of 15 per cent.
This was fairly predictable. First home buyers were used to having that $7000 grant – after all, it had been around for almost 13 years, and now they don’t have that incentive pushing them to buy. And due to a lack of new developments in the market right now, they have fewer opportunities to take advantage of the new grants anyway.
But it’s time for a reality check. Forget about the $7000 you could have had this time last year. With today’s interest rates so low, and rents continually rising, it’s actually more affordable to buy today than it was 12 months ago when you could have had the grant.
Let’s do the maths. Say you want to buy a $500,000 established apartment. Let’s keep it simple and use an interest-only three-year fixed loan at today’s incredibly low rate of 4.99 per cent. This time last year, the same loan was 5.99 per cent.
Okay, so because the property you want to buy is established, you’re not eligible for today’s grant, but you would have been eligible last year.
Last year, you would have received the $7000 grant, so your loan would have been $493,000 instead of $500,000. On 5.99 per cent, that equates to monthly repayments of $2,460 or $568 per week
Today, on 4.99 per cent at the full $500,000, you’re paying $2,079 per month or $480 per week
So today, you’re going to be about $90 per week better off despite not having the grant.
Rising rents is the other factor to consider. This time last year you were probably paying $5 or $10 per week less, so this also makes a difference. Consider this too – an RP Data report released late last year showed there were 2,622 suburbs nationwide where it was cheaper to buy than rent (based on a three-year fixed rate interest-only loan of 5.55 per cent). Would you be surprised to learn that 350 of those suburbs were in Sydney, the most expensive market in the country?
Check out the other states and territories – 311 suburbs in Brisbane were cheaper to buy in than rent, 97 in Melbourne, 119 in Perth, 64 in Canberra, 240 in Adelaide, 66 in Hobart and 48 in Darwin.
In short, there’s no reason why first home buyers should stop buying in NSW and QLD but clearly, that’s what’s happening. The reality is, today’s low interest rates coupled with great value in the marketplace (perhaps not for long as the market is showing signs of growth in 2013) present a far more compelling case to own rather than rent today.
So, forget about the loss of the grant and focus on the good buying opportunities in today’s market.
Tuesday, March 26, 2013
Last week I gave you an overview of the major trends in NSW, the ACT and Regional NSW markets following the release of our 2013 Autumn McGrath Report. This week, we’re focusing on Brisbane and the Gold Coast and I’ll also give you my suburb picks for future price growth.
Brisbane is an increasingly aspirational place to live and an important business centre for the country. Flooding issues aside, Brisbane’s strong employment and population growth coupled with a supply shortage and rising rents are driving today’s market recovery.
Buyers lacked confidence in 2012 but sales activity is now improving, so I’m cautiously optimistic on price growth for 2013. Overall, I believe this year will serve as a platform for much stronger growth in 2014/2015.
Upgraders and investors are driving greater sales activity this year. The typical upgrader is swapping a two bedroom workers’ cottage worth $600,000-$800,000 for a $1M-plus Queenslander. There’s not a lot of cross-town moving, as low interest rates and good value prices are enabling people to buy a larger home in inner city areas where they already live.
Meanwhile, investors from both the local area as well as Sydney and Melbourne are filling about half the void left by first home buyers. Investor hot spots include Toowong, St Lucia and Paddington. Investors are also active in thriving regional centres such as Toowoomba, where the proposed jet-capable Wellcamp Airport will bring exceptional benefits.
My top suburb picks
Hawthorne: Has been hugely transformed with new lifestyle amenities, food markets and a local café scene. Very appealing for families, young professionals and renovators.
Toowong: Just 4km from the CBD and less than five minutes to the St Lucia campus, Toowong is an investor hotspot due to high demand from young professionals and students.
West End: A great inner city feel and café culture; also close to the impressive South Bank restaurant precinct. A surge of development is attracting investors and owner-occupiers.
The Gold Coast
The Gold Coast is undoubtedly one of the country’s most exciting markets right now. Sentiment is changing and the bottom of the market appears to have passed, although there is amazing value still available.
There’s greater buyer enquiry across the board, and while prices are still well below their pre-GFC highs, homes are selling in a more reasonable timeframe. We may not see major price growth this year, but we’ll definitely see more sales.
Coverage of the Gold Coast slump has been widespread and this has encouraged a lot of interstate interest among investors and seachangers, particularly from Sydney and Melbourne. Today, about 50 per cent of buyers are from out of area seeking an affordable waterside property or growth investment. Investors usually buy at the lower end – typically apartments, but the opposite is true on the Gold Coast, with investors competing against local upgraders for larger family homes in canal suburbs.
Waterfront houses in the low million dollar range are popular in Isle of Capri, Mermaid Waters, Benowa and Sorrento. The prestige sector is also firing up, with several $5M-plus transactions since November 2012. Notably, last month $9.8 million was achieved for a waterfront home in Southport, selling under the hammer and setting a new suburb record. Just over a week ago, we also sold a waterfront home on the Isle of Capri that fetched $6.35 million, also at auction.
My top suburb picks
Isle of Capri: On the cusp of Surfers Paradise and Broadbeach, you can walk to the beach and live in a beautiful home on the canal. Very popular with upgraders and Sydney retirees.
Labrador/Arundel: On the edge of Southport and serviced by the soon-to-arrive Mass Transit System, this area encompasses the new hospital and expanded university campus and promises massive opportunity for investors.
Tugun: A true ‘insider’s secret’ offering a fantastic family lifestyle, beaches, easy access to Coolangatta and a small community feel. Young families are moving in and renovating beach cottages.
Tuesday, March 19, 2013
Last week I gave you the highlights of our newly-released Autumn 2013 McGrath Report. We went over the macro factors affecting the market - including a stabilising global economy, China, improving business and consumer confidence, falling mortgage rates and low unemployment and inflation.
Over the next couple of weeks, I thought we’d drill down into the local trends in NSW, ACT and QLD and I’ll also give you my tips on the best suburbs to buy in for future capital growth and why.
Let’s start with Sydney, Canberra and Regional NSW.
Sydney is once again leading the national recovery. We’re seeing more investors, particularly those buying through SMSFs; a long-awaited change in the prestige market and the slow return of downsizers and retirees.
People want to ‘get on with it’ after hesitating in 2012. At the lower end of the market, the retreat of first home buyers is giving investors more room; while at the upper end, new activity is being driven by the share market, downsizers and the Chinese. Prestige property prices are still 10%-plus off their 2007 peaks and deleveraged buyers are in an excellent position to take advantage of this.
As shares continue to rise, so does individual wealth, and this will have a particular impact on downsizers. Would-be downsizers and retirees lost substantial savings in the GFC and many put off retirement as a result. Things are better now and downsizers are getting back into the game.
My top suburb picks
Erskineville (and surrounds): The cheaper alternative Surry Hills, it’s adjacent to the thriving King Street retail and café strip with the university and hospital precincts supporting strong rental demand.
St Ives: A leafy upper north shore area where $1M buys a great family home that would be $1.6M in the trendier east.
Forestville: One of a few forgotten suburbs wedged between the northern beaches and the north shore. Ticks all the boxes for a great lifestyle and capital growth.
ACT – Canberra
Last year was a tough year for Canberra, with sales volumes 47% down on the five year average, according to RP Data.
Last year, people were happy to sit on their hands as the market continued its correction and an oversupply became evident in the apartment sector. People were also mindful that a Federal Election was around the corner and this always makes the locals nervous about their jobs.
Now that we have a firm poll date, locals are seeing an opportunity to buy or sell now before the inevitable slowdown mid-year. Prices remain soft-ish and with interest rates so low, we’re seeing more people at opens and solid prices being achieved for quality homes.
My top suburb picks
Wanniassa: This family suburb is likely to benefit from the proposed master re-development plan for the nearby Erindale Centre and Erindale Drive precinct. People are keen to buy now for future gains.
O’Connor: Close to the CBD, it offers older homes on larger than average blocks. Young couples and families are targeting O’Connor with the intention of renovating or building $1M-plus homes.
Downer: Downer’s business park is being re-developed and there’s the possibility of a light rail passing by the suburb to connect the CBD with Gungahlin. Great value for families and renovators.
Many key regional markets were relatively strong in 2012, while others showed signs of improvement but not to any great extent. This year, sales are up across the board and there’s an optimistic air in the marketplace.
Senior executives are a growing force. Some are buying retirement homes now to use as investments or weekenders while others are making a lifestyle change and telecommuting. In areas such as Port Macquarie, Bowral, Byron Bay and the Central Coast, there have been a number of sales above $1M to investors and/or future retirees in recent months.
City investors are looking to regional areas for affordability and strong yields. Fewer first home buyers and an increasing number of sea/tree change families choosing to ‘try before they buy’ means rents are likely to continue to rise and vacancies will remain low.
My top suburb picks
Bowral: One of Sydney’s traditional outer regions for weekenders and family homes. There’s great value available, with future retirees looking to buy now at today’s low prices.
Ocean Shores: A fast-growing community close to Byron Bay with great buying opportunities. Buyers are a mixture of retirees seeking sun and lifestyle and young families looking for a great place to raise their kids.
Eleebana: This is a top location – close enough to Newcastle's CBD and walking distance to Warners Bay cafés and shops. It has an excellent primary school and a strong community feel.
Tuesday, March 12, 2013
We’ve just released our Autumn 2013 McGrath Report in which I give my perspective on the macro factors affecting our property market as well as local trends in several key east coast city and regional markets, including my suburb picks for future growth.
Over the next couple of weeks, I’ll talk you through the key points in our report and I’ll go into a bit more detail on local market trends. Let’s start this week with an overview of where we are now.
In my opinion, this year will be the turnaround year in Australia’s property market. There’s already been a noticeable uptick in demand and sales across many key areas and mortgages rates remain exceptionally low.
Those who get in first will reap significant rewards as they ride the wave of price growth from the bottom. As prices continue to rise, the ‘fear of missing out’ will be a factor and more people will come off the sidelines.
As we begin the turnaround process, Sydney and Brisbane are clearly the two most exciting major markets in Australia right now.
Sydney is leading the recovery but Brisbane isn’t too far behind. Both markets are benefitting from national factors such as falling interest rates but Brisbane has a lot more going on locally that is likely to contribute to strong activity and good price growth over the next few years.
This includes a growing local economy and a population that is set to skyrocket, with 25 per cent of Australia’s population growth expected to occur in South-East QLD over the next couple of decades. Yet today, you’ll pay $445,000 for an average Brisbane home compared to $600,000 in Sydney and $520,000 in Melbourne. That’s seriously good value.
In a recovery, confidence is key. The GFC had an impact on Australians’ confidence and while the market has presented fantastic opportunities for some time, many have been slow to respond, preferring to wait until the market has ‘found its bottom’. Believe me, the bottom has now passed.
Here are the key indicators proving an economic and property market recovery is underway:
- Improving business and consumer confidence. The Westpac-Melbourne Institute Consumer Sentiment Index has been at or above the 100-point equilibrium for three consecutive months after 14 of 16 months below it. Meanwhile, the NAB business index rose from -9 in November to +3 in January. With the upcoming Federal Election, most experts are tipping a Coalition victory and this should provide an even greater confidence boost
- A stable global economy. We’re seeing some good news out of the US and Europe appears under control for now. An impressive 25 per cent increase in the ASX All Ords since June 2012 will be a strong catalyst for growth in the more expensive price brackets
- Falling mortgage rates. Further rate cuts by the banks have brought the average three-year fixed loan to its cheapest level in two decades, according to RateCity
- Low unemployment and inflation. Unemployment is low at 5.4 per cent and inflation is at the bottom of the Reserve Bank’s 2-3 per cent comfort band at 2.2 per cent
- China. China remains on an upwards surge with an 8 per cent anticipated growth rate this year (and beyond) and we will benefit more than any other country. Much has been made of the end of the mining boom, but there’s still plenty of benefits to come as we transition from an investment to production phase
- Rising new loans. Australia’s largest mortgage broker, AFG, posted record months in January and February with between 35-50 per cent of new loans in NSW and QLD going to investors
- Major investment activity. Investors are driving a major restructure of our property market as first home buyers retreat. The investor trifecta of cheap money, rising rents and price growth is bringing them back in droves. Cash and term deposits are far less attractive and there’s continuing strong interest in purchasing via self-managed super funds
Overall, I believe we’re at the start of a 3-5 year cycle of growth. At this stage, I’m tipping a solid 5 per cent-10 per cent growth rate across the major east coast markets this year. The lower to middle brackets of the market will remain buoyant, with the prestige sector firing up probably in the second half of 2013.
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