The folloing is a media release from the Housing Industry Association:

Housing Shortage Tracking to 500,000 by 2020

The Housing Industry Association, Australia’s largest building industry organisation, today released its inaugural Housing to 2020 report. The report finds that if current building trends persist, then Australia’s cumulated housing shortage would reach 466,000 dwellings by 2020.

HIA Senior Economist, Mr Ben Phillips said that Housing to 2020, which focuses on future housing demand and the number of dwellings required in meeting this demand, highlights a current housing shortage that already numbers over 109,000 dwellings.

“The reality in many regions and cities in Australia is that affordable, well located land is not available or abundant. Furthermore, planning restrictions, higher taxation on new housing relative to existing dwellings, labour shortages, and onerous regulation biased toward new housing all add to the problem.

“If we don’t get a comprehensive supply response to the accumulating housing shortage then the lack of affordable and appropriately located rental properties will only worsen, while pressures on existing home prices will continue at an undesirable rate, placing avoidable upward pressure on interest rates,” Ben Phillips said.

“A lack of skilled labour is an emerging threat to the much needed housing supply response. A second round resources boom this decade will draw heavily on an already tight labour market. The $90 billion worth of resource projects on the books is expected to demand an additional 136,000 direct and indirect jobs. This labour will need to be housed, adding additional pressure to the supply of labour and materials in non-resource regions.”

Housing to 2020 provides the first estimates made of Australia’s housing shortage at a Local Government Area (LGA) level.

“The report finds that shortages exist in just under half (295) of the 669 LGA’s across Australia. The majority of the shortages can be found in and around metropolitan Sydney and Brisbane.

“It was also found that many of the LGA’s with the largest housing shortage are also the same regions with the highest level of demand. Again, it’s the growth areas in the greater Sydney area and in South East Queensland where demand will be amongst the highest in the nation.

“The growth areas in and around Melbourne also show high levels of demand.

“Current construction levels in most high demand areas are simply not sufficient to meet the needs of a fast growing population,” said Ben Phillips.

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Extracts from a recent UBS Research report: 26 February 2010

We have been arguing since 2008 that the combination of a long-standing structural under-supply of housing, coupled with a cyclical improvement in affordability – via falling prices in 2008/early 2009, government stimulus & lower rates in 08/09 – would see activity rise strongly in 2H09 and 2010. Indeed, the very strong 10%+ rise of house prices in 2009 – and the 59% leap in building approvals since January – is symptomatic of rising demand.

For house prices, after correctly forecasting the 5% peak-to-trough decline through Q109, our forecast for a 3% rise through 2009 was well short of the actual 11% gain. Looking ahead, while we continue to expect a moderation beyond 2009, we take this opportunity to formalise our forecast for 2010 and 2011 price growth at around 6% (broadly in line with the economy’s trend income growth), up from 3% previously. This also partly reflects the likelihood that bottom-end prices should be softer given the expiry of the FHOB.
We have also updated our forecasts of underlying demand from 180k-185k to 200k over the next few years – incorporating the record pace of population growth over the year to Q209, as well as the Government’s upgrade to population forecasts contained in IGR3. This in turn, highlights the chronic undersupply of physical housing in Australia.

Our estimate of the ‘cumulative gap’ of under-building is currently a shortfall of around 75k, doubling to a record 150k by end-2011. As an aside, these estimates are more conservative than the National Housing Supply Council’s (medium scenario) estimate of the cumulative gap being 85k as at Q208, rising to 155k in 2011 (and then continuing to deteriorate to 203k in 2013 and 316k in 2018).

RBA Gov Stevens also recently noted the ‘under-hang’ of housing construction. One obvious solution is the creation of higher-density housing, both in terms of urban density (ie more units compared to houses), and more persons per household.

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Although rental yields are expected to fall in 2010, this is actually positive for property investors as growth of property prices are expected to exceed that of the rental market.

We need to look at the whole picture to understand what is currently happening in the market.

Many First Home Buyers were sucked into the market last year due to the Government incentives. Those that were on the edge of buying would have bought and those thinking about it would have rushed to take advantage of the grants made available. This has been the case and supported by the reported record number of first home buyers in the market through 2009. Towards the end of 2009 we saw the rate of First Home buyer lending fall as they moved out of the market as grants started to disappear and interest rates started to rise.

Rising interest rates are another major factor that is going to keep first home buyers out the market now. With affordability becoming an issue for home buyers, property investors will take their place as they are able to take advantage of negative gearing tax benefits.

Property Investors are all focused on property that is high in demand. This includes the 1 and 2 bedroom new apartments, townhouses and house and land packages. They are all affordable and demand for rental of these property types is going to grow as First home buyers stay clear of buying. It is also important to remember the high migration levels to Australia and those from interstate are putting pressure on the states property markets.

The property market is expected to move up substantially this year, possible even more so that last year which means that although property prices will grow, and rental prices will increases, the growth or property prices will exceed the growth in rentals thus reducing the investors yield.

How to ensure you get the best of both worlds… Buy sooner and hold for longer.

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Australian Property Outlook for 2010

I hope everyone had a fantastic break over the festive season. We at Find Investment Property wish everyone all the best for 2010.

In the first week of the year, the Australian Financial Review had a summary of each of the property markets across Australia. Below is a brief summary from each of the stories that appeared in the paper from the 4th January through to the 8th January 2010. The articles cover the Melbourne Property Market, Sydney Property Market, Queensland Property Market, Western Australian Property Market, Tasmanian and the Adelaide Property Markets.

In each of these articles, the journalist has interviewed a few people in the relevant states property industry that may have some bias towards each state, thus all pushing a positive sentiment for their respective property markets.

Having said this I do think they all have good arguments for why buying in each area should see capital growth occur in 2010.

Melbourne Property Outlook 2010

Comments below are from Cameron Anderson, a Director at Red C and Canopi Homes. He previously was in a senior management position at Stockland.

• 2009 property market was fuelled by federal government grants and Melbourne’s appetite for new homes (Due to Stamp Duty Savings)
• Cautious outlook for 2010 – median growth expected to be 3% before the market picks up steam in 2011.
• RP Data stated Melbourne’s median price grew 15% for the first 9 months of the year
• Little supply of apartments in the pipeline at the moment
• Rental pressure in Melbourne and it’s growing because the banks have been reluctant to lend money to high-rise developers
• Big drivers for property prices include supply constraints and population growth

Other comments on the Melbourne property market from Angie Zigomanis at BIS Shrapnel and Tim Lawless at RP Data Research

• Expected to have solid growth through the year as upgraders and investors take over from first home buyers
• Higher interest rates will slow growth down from the highs of 2009
• Late recovery in 2009 may show that first home buyers are less sensitive to rising interest rates
• New development in Melbourne is falling short of Melbourne’s migrant-driven population growth
• 2009 price growth was helped by cashed up Chinese buyers which is expected to continue into 2010

Sydney Property Outlook 2010

Comments below are from Brian Haratsis from MacroPlan Australia and Rob Ellis from Property Insights

• Population boom to lift prices
• People that can afford to buy now will stand to benefit the most
• Sydney expected to see the fastest population growth in 15 years
• Climbing prices in South-East Queensland have slowed migration from NSW to QLD
• Same levels of international migration plus high birth rate levels
• Employment generated population growth – young brains from around the world will come to work in Sydney-based financial services, IT and Business services
• Apartment market is being starved of stock owing to tight lending practices that restrict developers by loan to value ratios plus high levels of pre-sales
• Rents poised to soar even higher due to the shortage of rental accommodation, especially with rising interest rates deterring some people from buying
• Prestige property to remain flat for the next 24 months before a potential boom in the high end market
  10% price growth for 2010 wouldn’t be a surprise

Comments below are from Louis Christopher of SQM Research and Jason Anderson from BIS Shrapnel

• 6 – 8% price growth expected in the next 12 months
• Nothing to indicate buying trend will stop or slow
• Price growth in 2009 was 11.6% but affordability was its lowest level since 2002 because interest rates were so low
• Prestige prices (those over $2m) to rise by 12 to 15% in 2010
• Sydney will face an ‘extreme’ shortage of rental properties, worse than any other state
• Rental demand would boost demand for properties in outer suburbs which could result in price growth of 10%

Perth Property Outlook 2010

Comments below are from Nigel Satterley from Satterley Property Group, Western Australia’s largest private residential property developer.

• Perth property prices poised for a decade of strong growth
• 6% expected in 2010 with increases of 7 – 10% over the next 7 to 8 years
• Perth property prices fell by as much as 25% during the downturn
• Population growth and growing confidence affecting the market
• Demand is increasing for premium property
• Medium house price in Perth in September 09 was $462,000
• Prior to 2008, Perth’s property prices doubled in 4 years as demand outstripped supply
• Bank funding for property developments will remain constrained

Adelaide Property Outlook 2010

Comments below are from Michael Brock, Managing Director of Brock Real Estate and president of Real Estate Institute of South Australia.

• Enormous untapped potential in the real estate market
• Adelaide soon to assert itself as one of the most attractive investment destinations in the country
• 2009 saw house prices jump 5% and growth is predicted to double in 2010
• Adelaide’s median house price in September 09 was $421,765
• Property investors now taking the place of first home buyers
• Population Growth expected from skilled migrants and those serving the defence and mining industries
• Adelaide vacancy rate is 1.2% while North Adelaide is only 0.2%
• Many new apartment projects on hold due to finance obligations which can’t be met by Developers

Tasmania Property Outlook 2010

Comments below are from Tim Lawless, Research Director at RP Data

• Could perform well in 2010 due to lifestyle buyers entering the market
• Houses in Hobart are $140,000 cheaper than the national capital city average with an average price of $330,000
• Units average $270,000, $120,000 cheaper than the capital city average
• Tasmania does not have strong population growth or a large economic base
• Rental returns in Tasmania are above 5% with vacancy rates below 2%
• Population growth is just over 1% driven by migrants, retirees and younger families seeking affordable housing

Queensland Property Outlook 2010

Comments below are from Wayne Rex, President of The Property Council in Queensland

• Brisbane property prices increased 6.9% in the first 11 months of 2009
• South East Queensland has seen a stabilisation of prices and turnover
• Building Approval levels have dropped to low levels not seen since the 1980’s
• Many house and land packages still available in South East Queensland for under $425,000
• Release rate of new stock and lack of competition is affecting prices
• Queensland property market will be steady for the first 6 months of the year as people will still remain cautious
• Funding still difficult to attain along with substantial pre-sales

Other comments from Bill Morris, Rod Cornish (Macquarie Capital Advisors) and Lachlan Walker (Colliers International)

• Still not enough homes being built in Queensland
• South East Queensland saw a population increase of 75,000 in 2008-09 with a need for 30,000 homes, yet only 17,000 were built
• Interstate migration has dropped in Queensland (Victoria now leading the way), there is still a high number of people coming from overseas
• Developers still finding it difficult to attain finance
• Developers can’t buy land at the right price meaning they can produce a home at affordable levels (under $500,000)
• QLD suffering from a shortage but Sydney supply shortage is more severe

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Some comments from Ross Greenwood earlier this year:

Right now the Federal Government is at pains to tell everyone – including us the mug-punters to the International Monetary Fund that it will not exceed its own, self-imposed, borrowing limits.  

How much? $200 billion. And here’s a worry. If you work in a bank’s money market operation; or if you are a politician; the millions turn into billions and it rolls off the tip of the tongue a bit too easily.    

But every dollar that is borrowed, some time, has to be repaid. By you, by me and by the rest of the country.     

Just after 5 o’clock tonight I did a bit of maths for Jason Morrison.  But it’s so staggering its worth repeating now. First though … here’s what Chairman Rudd has been saying about – what he calls – these temporary borrowings. Remember those words … temporary deficit but the total Government debt could end up around $200 billion.    

So here’s a very basic calculation … I used a home loan calculator to work it out … it’s that simple.

$200 billion is $200,000 million. The current 10 year Government bond rate is 4.67 per cent. I worked the loan out over a period of 20 years.   

Now here’s where it gets scary … really scary.   

The repayments on $200 billion come to more than one and a quarter billion dollars – every month – for 20 years. It works out we as taxpayers – will be repaying $15.4 billion in interest and principal every year …$733 for every man woman and child – every year.   

The total interest bill over the 20 years is – get this – $108 billion.    

And remember, this is a Government that just 18 months ago had NO debt. NO debt. In fact it had enough money to create the Future Fund to pay the future liabilities of public servants’ superannuation … and it had enough to stick $20 billion into the Building Australia Fund last year….

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For every property investor, Landlord Insurance is essential. Buying an investment property is usually part of a wealth building strategy and being the landlord, you would not want to see that disappear. Landlord’s insurance is important to help protect you from certain aspects of owning an investment property including:

• Rent default – Loss of rent
• Legal liability
• Theft and malicious damage by tenants or their guests
• Accidental loss of damage
• The extra costs of rebuilding such as architects fees and removal of debris

It is important to have proper protection for not only the investment property but also the belongings you provide to your tenants. The Landlord insurance is generally a relatively small cost but could save you thousands of dollars should something go wrong.

So why is it that many landlords in Australia don’t protect themselves accordingly? If you don’t organise it yourself, your property manager should make you aware of it and even offer to organise it for you. The two main reasons that a landlord should take out a landlord insurance policy in Australia is to protect them from rent default and theft & malicious damage by tenants. There seems to a be a reliance on most tenants doing the right thing, however sometimes it may not be the tenant but rather one of their guests.

The rule of thumb with risk is to insure what you can’t afford to lose. So, be sure you are protected and take out the necessary landlord’s insurance. Failure for a tenant to pay rent for a few months could see significant financial stress on your circumstances which could ultimately lead to forced asset sales.

Eynas Brodie states “Seeking cover for buildings and contents, loss of rent and legal liability needs to be at the top of your list of priorities and so does understanding the policy terms and conditions that are set out in the policy because the types of loss for which you are covered are defined clearly and it’s only those losses that are covered.”

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Australia Housing Outlook 2009 (ANZ Summary)

The outlook for the global economy has stabilised however the recovery is expected to be slow. The Australian economy has fared one of the best of the global economies and has thus far avoided a technical recession, although I believe the pain is still very real here. Economic growth in 2009 is likely to be slow; however the ongoing government stimulus along with the improving Chinese demand will help stimulate the economy moving forward. It is important to note that the report does not mention that Australia’s economy would continue to fall… they are expecting growth, albeit very small for the 2009 year.

The Australia housing market has performed significantly better than other developed economies around the world. According to Residex it has softened by 1.2% to the month of May 2009, while RP Data suggests that there has been no change to house prices. After interest rate cuts and government assistance with the first home buyers boosted grants, there are even signs of price movement upwards.

ANZ suggest that the Australian housing market will be tested over the medium term on a number of factors. These include:

• Housing Affordability to test record highs because of government stimulus at both federal and state level as well as low interest rates, which may even be cut further. The market will be tested by home ‘upgraders’ (those that are buying their 2nd or 3rd property) and property investors.
• Population growth is at its highest levels in 4 decades. This high population growth is creating a high demand on dwellings which has consequently been proved by very low vacancy rates.
• Housing Supply – There has been a slow down in the development of new housing due to a subdued market, financing difficulties, and higher development costs
• Labour market – the uncertainty of the labour market and where unemployment may fall to is leading some market commentators to think that there may be a lack of confidence in the housing market as home buyers don’t wish to commit to large mortgages when they have uncertainty in their employment, thus reducing demand on housing and housing prices. ANZ state this is probably a second-order influence on housing market outcomes.

ANZ state, “We expect dwelling prices to edge higher for much of the remainder of 2009 with upside risk presenting from intensification of strong fundamentals, a shift in price expectations and a restoration in market confidence.

ANZ Market Balance - June 2009

ANZ Rental Vacancy Rate June 2009

ANZ Affordability June 2009

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Home Buyers Show Brisbane

Brisbane Property Expo on 13th and 14th June 2009 at the Brisbane Exhibition Centre. Perfect for property investors and home buyers.

Find Investment Property is excited to announce that we will be participating at the upcoming Home Buyer Show at the Brisbane Exhibition Centre on Saturday 13 and Sunday 13 June. It is the only major event in Australia dedicated to helping people actually buy or sell a new or established home or apartment whether as a primary residence or investment property.

The dream of home ownership is alive and well in Australia, and with interest rates at record lows, property prices cooling, substantial Government grants still available and a strong rental market, home buyers and property investors are returning to the market in large numbers.

Now more than ever, home buyers and investors need to do their research, understand market conditions, and have access to all the right independent advice from reliable sources to make informed buying decisions to enable them to get on the right path to the right property.

The Home Buyer Show will provide first, second and third time property buyers with all the information they need to help discover the smart way to finance, find and buy a home or investment property – direct from the experts.

Some of the major show highlights include:

• Free seminars from Australia’s leading property and finance experts in government and industry associations
• Master Builders Zone – Master Builders members, Queensland’s leading building services companies, will be showcasing a wide range of new homes, display villages and house & land packages.
• Property Investor Zone (sponsored by Find Investment Property)- educating property investors of all levels including all the latest investment properties for sale on the market today with loads of experts on hand to provide independent, impartial advice.
• Apartment Living Zone – showcasing some of the latest apartment, unit and townhouse developments in SE Queensland

As part of a special promotion, we are pleased to offer all of our clients, partners and friends unlimited $5 tickets to the Home Buyer Show which are normally $15. Simply visit the website www.homebuyershow.com.au and when purchasing tickets quote the special promotional code FIP.

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New homes take the lead from new apartments when it comes to pushing the properrty market up. First home buyers have helped with an increase in detached new home sales by 1.1% in April according to the HIA. The number of detached new home sales was 3% higher than that of April 2008. Harley Dale, chief economist at HIA has suggested that the leading indicators point to housing as emerging bright spot int he economy.

HIA has forcast that 6,900 extra starts of new homes will occur in the second half of 2009.

Other figures released by the HIA suggested property investors were still a little hesitiant coming back into the market with new apartment and unit sales falling by 5.6% in April.

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The Australian property market has seen a glut in new build properties over the last few years as high interest rates, slow paced property markets and more recently stricter lending policies by the banks, have forced the industry into a dramatic shortage of new properties. This is all about to end according to the Housing Industry of Australia… and its about to end as soon as this year. Recent statistics released by the HIA states that the HIA forecasts the total number of completed homes in Australia will rise from 129,500 in 2009 to 139,200 homes in 2010. According to the HIA there were 141,000 completed homes before the onset of the global recession slowed construction and lending to the sector. Chief Economist of the HIA, Harly Dale says “The effect of the First Home Owners Grant boost, along with 49-year-low interest rates, will cause the housing sector to “grind out” a recovery in the middle of the year”.

Having stated that construction will rise, they still confirm that Australia will have a mass shortage of housing for many years to come. Harley Dale, said “Given the outlook for a modest rather than significant recovery in new home building, the shortfall between dwelling completions and underlying demand will exceed 50,000 dwellings per annum for some years to come.”

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