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

3 Comments »

After arriving in Melbourne last Sunday Night I have thoroughly enjoyed my time in Melbourne. It is not the first time I have been in the city and certainly won’t be the last… as a Sydneysider it is always difficult to make comments about Melbourne being better than Sydney in anything, but I can say Melbourne is a fantastic city that has a vibe like no other in Australia. The city itself is amazing with the most fascinating buildings from grand old heritage churches and museums to funky designed modern office and residential buildings. It really does have a life of its own.

Our first day in Melbourne, we met with developers that crossed the inner city regions. We first went to Collingwood to meet with Caydon, across to busy Richmond to meet with Cubo and then over to Port Melbourne where we met with Salta. The evening was spent in Brunswick. Each one of these places is so different and offers a fantastic lifestyle to anyone that lives or visits the areas.

Collingwood is one of Melbourne’s oldest suburbs with many old heritage buildings. Richmond is going through a period of gentrification with a mix of the ultra modern and tired old buildings that are waiting for a little attention. The three main streets in Richmond that are going through the current gentrification include Victoria, Swan and Bridge Streets. Port Melbourne is a suburb largely dominated by industrial sites at present along the shores through to open parklands, bayside beaches, exclusive apartments and Bay Street’s restaurants and cafes.

Tuesday we explored other suburbs including Prahran, St Kilda and the City. Through the day we met Hamton, Bensons Property Group, Brady Property Group and FKP. A lot of new apartment developments are occurring in these suburbs. Each of these suburbs is all well established.

Wednesday was another day on the road meeting with developments. We met with PDG in the City, Deal Corporation in Toorak, Birner Property Group in Armadale and Ninety Four Feet in North Caulfield. We spent the afternoon exploring some of the suburbs in eastern Melbourne out to Oakleigh.

The suburb Toorak is the glitz and glamour of Melbourne. Definitely the most upmarket strip shops I have visited during the week and very clean. Looking in the window of the local real estate agent, prices are high. Toorak is not only viewed as one of the best (thus also most expensive) suburbs in Melbourne, but also in Australia.

Thursday we met with FDG (Salvo Property Group), Extension Marketing, Fridcorp in South Yarra, Hickory in Richmond and Map Concepts just north of the city in Fitzroy.

Overall the visit was a huge success. Getting feedback from the developers has been positive and we look forward to bring you more new projects from these developers plus many more that we are currently talking to.

It is easy to see why Melbourne has been such a popular market for property investors over the last few years…. it is a great place to live!

1 Comment »

Developers in Victoria are concerned that demand for new property up until 30 June 09 may drop as more first home buyers wait for the new grants to be available from 1st July 2009. Currently new home buyers will recieve a total of $26,000, however from the 1st July this is going to increase to $32,000. The 6 week gap of subdued activity may force developers to offer their own “subsidies”, which is exactly what Devine Property has done. They weren’t going to wait around for the next 6 weeks for the Governments announcmenet to take effect. Instead they have taken the innititave to offer the incentives immiedietly out of their own profits ensuring that there wouldnt be a drop off in demand for their developments.

Luke Hartman, Devine’s Victorian General Manager has said that the current times have been the best they have seen for first home buyers. Devine is targeting buyers aged 25 to 39 who had double incomes. With a 50% increase in sales since October 08 when the boosted grant was immplemented, it looks like Devine are oncourse for another successful year.

In April 09, Victoria saw almost 4,500 first home buyers come into the market with about 75% of those looking to buy established property. Victoria has the most generous boosted grant scheme compared to the other states.

No Comments »

“First home buyers who qualify for the First Home Owner Grant (the grant) may also be eligible for an additional payment known as the First Home Bonus. To be eligible to receive the bonus, the value of the property must not exceed $500,000. ” (SRO)

So from the 1st July 2009 through to the 30 June 2010, the Victorian State Government will provide an additional $2,000 for FHB of established property and $11,000 for FHB of new homes. This is on top of the Federal Government First Home Buyers Grants.

In addition to the above, the state Government is also encouraging First Home Buyers to purchase in regional Victoria. There is an additional $4,500 on offer for those that buy in Regoinal Victoria. Here is a link of all the municipalities that comply with the additional Regional Boost: http://www.sro.vic.gov.au/sro/srowebsite.nsf/taxes_firsthome_bonus_regional.htm 

This is a very proactive step by the Victorian State Government and really encourages more people to buy, it helps spread the interest to new growth corridors and encourage developers to continue to bring new product to the market. All in all a great result for the residents of Victoria.

No Comments »

Some First Home Buyers in Victoria are jumping for joy as new plans are announced for the states First Home Buyers Grant. The grant has been extended by 12 months with some modifications. It is now  focused heavily on new home buyers. The state bonus that was $5,000 has now been increased to $11,000 from the 1st July 2009. Further incentives have also been put in place to encourage home ownership outside of Melbourne in regional Victoria. Where First home buyers were once getting $3,000 for a purchase in regional Victoria, they will now be receiving $4,500 from 1 July 2009. The First Home Buyer state bonus will be avaiable for those purchasing under $600,000.

“Premier John Brumby said today the new package was aimed at helping Victorian families into their own homes sooner by offering $22,500 for first home buyers purchasing a new home in regional Victoria, $18,000 for a new home in metro Melbourne and $9000 for an existing home as of 1 July this year.”

This is a big commitment by the State Government, however the positive effects on this should be well worth it. Further to this, this statement also reduces the pressure of the Federal Government to continue their First Home Buyer Bonus. The focus on the Federal Budget tomorrow night will give us an inidication of where the Rudd Government sees the place of the Australian property and construction industry in the recovery from the current economic turmoil that Australia and the rest of the world are in.

No Comments »

The AFR have put together an overview for each of the capital cities in each state of Australia. Below is a quick summary of each:

Sydney (-7.31% last 12 months)

• - Top end market is suffering
• - First Home owners Boosted grants + Low interest rates are creating a floor in the housing market at the lower end
• - Homes under $500,000 are the strongest sales seen in many years
• - Cheaper to buy than rent in some areas
• -Expected flat 2009 with growth returning in 2010
• - Rising unemployment will apply pressure on Sydney house prices

Perth (-10.1% last 12 months)

• - Perth house prices likely to remian depressed for the next 12 months
• - Pace of the drop in property prices is set to slow down
• - Some perth suburbs are still growing
• - RP Data using different methodology calculates Perth’s property decline at only 6%
• - Market likley to go sideways due to rising unemployment
• - First home buyer still strong

Darwin (+10.8% last 12 months)

• - Continue to power ahead
• - Properties are selling very quickly – usually within 2 weeks if priced between $300,000 and $750,000
• - Population forecast to grow by 70% to more than 200,000 people by 2030
• - Driving growth is defence and international resource investment for gas and oil
• - Vacancy rates are negligable and average yields are 6.3% on units and 5.3% on houses
• - Darwin is Australias most expensive city at the moment to live in according to HTW’s monthly review

Adelaide (-1.9% latest 12 months)

• - First home buyer market is still very hot
• - Defence Housing Australia looking to purchase a number of sites for their recruits
• - Upper market, above $600,000, is a little slower

Brisbane (-6.3% latest 12 months)

• - Market has slowed as property prics ahve caught up with both Melbourne and Sydney
• - RP Datat only shows a fall of 3.42%
• - House prices under $500,000 have increased by as much as 10% according to Michael Matusik
• - Sales volumns are down 40% in some locations of Brisbane
• - Top end market still suffering as more properties come on tot he market than are sold

Melbourne (-6.7% latest 12 months)

• - Static prices predicted for the next 6 months and then moderate growth
• - Stability and price growth based on conitnued population growth, continued Goverment grants and a reaosnablely health economy
• - Of the top 20 growth suburbs in Melbourne, 15 had a median price of under $500,000

No Comments »