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09-12-2009 - PROPERTY REPORT - December 2009 |
PROPERTY REPORT - December 2009
We're going to see a different market in 2010.
by Terry Ryder.
creator of hotspotting.com.au
NATIONAL OVERVIEW:
Expect a different market emphasis in 2010
We're going to see a different market in 2010.
The current year has been dominated by activity at the bottom end. First-home buyers and others on a budget have been busy taking advantage of low interest rates and improved affordability. The FHOG has been over-rated by almost everyone, but has had some influence (there's lots of research to support that, as opposed to the idle speculation of economists and journalists).
Next year will see higher price ranges more dominant. Trade-up buyers and investors will be more visible. It's clear to me that investors have become increasingly active as 2009 has worn on and are likely to make a significant impact in 2010.
There will a continuation of the trend whereby more buyers opt for apartments for affordability and lifestyle reasons. One of the coming trends worthy of investor attention is Transit Oriented Developments (TODs), whereby governments are encouraging apartment development close to transport nodes.
There will be solid price growth but nothing spectacular - as a general statement.
As is the case in every market, there will be out-performers. Many of these will be regional centres, an area overlooked by most property investors. Research indicates most investors favour the inner suburbs of capital cities and sea change locations. This suggests most investors have no idea where the best long-term capital growth is found (an outcome of the misinformation I refer to in the Introduction).
In the next few years, some of the best performers will be key regional towns and cities, including Geraldton and Bunbury in WA, Newcastle and Orange in NSW, Gladstone and Kingaroy in Queensland, Victor Harbor and Port Lincoln in SA, and Portland in Victoria.
That is not to say there will be no growth areas in capital cities. Sydney is finally showing signs of delivering meaningful prices increases, after six fairly dormant years. Melbourne and Canberra will continue to deliver their usual solid performances, Hobart and Adelaide will punch above their weight yet again, and Perth is on the comeback trail.
I've given up trying to make sense of Darwin, which has defied gravity longer than I expected.
FEATURE TOPIC:
The great housing bubble that never existed
Does anyone know what a "housing bubble" is? I'm sure most property journalists in this country do not. Many have been writing about the apparent national problem with a housing bubble without the faintest idea about the term's meaning.
Sub-editors have been so desperate to get this new buzz term into newspaper headlines that every new article about the real estate industry is topped with a reference to this scarey new thing.
It demonstrates the shallowness of property coverage in Australia.
A housing bubble is when prices become so inflated beyond reason that they're fit to burst. Western Australia had something approaching a housing price bubble in 2007 because, amid the resources-driven economic boom, the market went over the top. The WA market has spent the past two years in decline because it became over-heated and prices went too high.
But a housing bubble now? In Australia? The nation where prices were falling for much of the 2009 financial year? Get real.
It was only in the June Quarter that we saw a resurrection of property price growth around Australia, but only in a modest way. There was further pickup in the September Quarter, to the point where most of the eight capital cities now have values marginally higher than the levels of a year ago.
The only possible bubble I can see anywhere in Australia is in Darwin - but my earlier prediction that this market was heading for a correction has not come to pass.
It says a lot about the standard of real estate journalism that this whole notion of a real estate bubble was built originally on a lie. It emanated from a speech by the Reserve Bank Governor Glenn Stevens who said, quite simply, that he would be concerned if lower interest rates produced nothing more than higher house prices, rather than new housing supply. At no stage did he use the term "housing bubble". That was the interpretation journalists put on his words.
Suddenly it became a fact that Stevens was worried about a "housing bubble".
Stevens refuted the reports in subsequent testimony to Parliament. Following a series of questions about whether Australia was in the grip of a house price bubble, Governor Stevens responded: "I never used the word "bubble" …but I notice it has been freely used by various other people who reported the speech ... Relative to mean income, dwelling prices have actually declined since about the end of 2003…I thought that showed that you could have an adjustment here in a way that was not really disruptive - unlike some of other adjustments that we are seeing in other countries."
Dr Malcolm Edey, Assistant Governor of the RBA, reinforced these remarks in a subsequent speech, commenting: "Australia experienced its last major housing boom in the 2002-2003 period. For a number of years after that, the market went through a period of correction, when house prices were mostly either falling or were rising more slowly than incomes. This was also a period when construction of new housing was fairly subdued. Hence, the twin problems of overpriced housing and overbuilding that occurred in the United States in the run-up to the crisis were avoided in Australia."
Recently RBA deputy governor Ric Battellino said in a recent speech that Australians can cope with high home prices. He said Australian households appeared to have the capacity "to sustain a relatively high ratio of housing prices to income". He said he expected to see house prices continuing to rise in Australia.
I find it a little disturbing media sensationalism can convert a lie into a fact, often repeated. But, as with politicians, we get the media we deserve.
CANBERRA AND THE ACT:
A good place if you like safety
Canberra is the pin-up city for investors who value safety and solidity above all else. It never does anything spectacular but avoids major peaks and troughs.
Canberra seldom leads the nation is any sphere but usually sits at the middle of pack, as the latest economic indicators show.
Retail trade remains quite strong in the ACT. September figures were 5% higher than a year earlier, in line with the national average. State Final Demand in the ACT in the June Quarter was $9.4 billion, down 0.4% from the March Quarter and up 0.3% for the year (the national average was a slight decline in the June Quarter and a 2.5% rise for the year).
Building approvals for new homes rose 2.1% in the ACT in September, in line with the national average.
The one major exception is unemployment. In October, job ads rose 1.9%, compared with the national average of a rise of 1.4%, and the ACT now has the lowest jobless rate in the nation, at 3.7%, well below the national average of 5.8%. In tough economic times, we can always rely on government to be a growth industry.
Against a solid economic background, with the low unemployment figures particularly relevant, the Canberra property market is rock solid. The ABS House Price Indexes for the September Quarter show a 4.3% rise for the quarter and a 7.8% rise for the year to September, a little above the national average of 6.2%. The RP-data Home Value Index records a 3.8% rise for Canberra in the September Quarter, above the national average of 2.5%.
Housing finance for owner-occupiers in the ACT in September was 27% higher than a year earlier. The national average was no change in September and a 4.5% rise over 12 months, so ACT is an above-average performer in this regard.
Housing finance for investors in the ACT rose 1.7% in September, compared to the national average increase of 2.4%, but levels are 1.7% above the investor finance levels of a year earlier (the national average is 1.3% below the levels of a year ago).
All indications are that the Canberra market is holding up well and likely to thrive in 2010.
An extract from a report written by Terry Ryder. The full article with a detailed analysis of markets nationwide can be read at www.jenman.com.au
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