National Property Report – September 2013

NEW SOUTH WALES

Market finally has wings.

The Sydney property market is starting to soar, and yet NSW still leads the way in mortgage delinquency.

Over recent months, the relevant indicators have been predicting that the Sydney property market is set for a surge. Now, the latest figures from RP Data prove that surge is underway.

Sydney was the (joint-) best performing capital city over the month of June, with a rise of 1.2% in dwelling values. The RP Data quarter-on-quarter results for June show capital city dwelling values were up 0.2%, and this was largely driven by a strong result in Sydney. The trend is indicative of an ongoing recovery in dwelling values, according to RP Data.

A host of recent reports provide further evidence of the trend. Buyer activity in the city’s auction market has been steadily increasing since Easter, with auction clearance rates showing the highest level of buyer activity recorded at this time of the year for 10 years, according to APM.

In the latest Property Council of Australia-ANZ Property Industry Confidence Survey, NSW posted the largest state increase in property industry confidence (increasing 19 points to 131) in the June quarter. The report states that tight residential property market demand/supply fundamentals, low mortgage rates and solid housing market sales have driven property industry expectations for house price growth and housing construction higher.

The Residex May Property Market update notes the cost of the median house in Sydney is now more than $700,000. If growth continues at an annual rate of just 5.2% per annum, the Sydney median house price will rise to $1 million over the next seven years, according to Residex.

PropertyBuyer CEO Rich Harvey says the Sydney property market is definitely on the rise. “While it may not be sizzling just yet, the market has entered a phase of growth after a soft period of some years.”

Record low interest rates are stimulating investment and consumer confidence, while Sydney continues to struggle with a chronic under supply of stock at the same time vacancy rates are particularly low, at 2% or under, he says.

“Buyers are currently chasing properties with little regard for comparative value, and some properties are going to tender and are selling over full listed price. These factors are contributing to the rising property prices we are now seeing.”

Harvey believes the tight supply situation will put gradual pressure on property prices, which should encourage vendors to list their property for sale. “However, despite this and a slight increase in building approvals last month, the buyer price pressures will not be alleviated much.”

Potential investors need to do their property value research thoroughly but quickly, he says. “There is no luxury of time in this market. Investors should jump at the opportunities out there, while avoiding overpaying.”

VICTORIA

Surprise improvement in Melbourne market.

Melbourne is displaying a markedly improved outlook, but that apartment oversupply problem continues to linger.

Certain health problems have long plagued Victoria’s property market but, in recent months, it has started to look much healthier and more confident.

Victoria’s market reported a significant increase in confidence – with a rise of 18 points to 117 in the June quarter – in the latest Property Council of Australia-ANZ Property Industry Confidence Survey. This result is Victoria’s first positive index reading since the first survey in December 2011.

ANZ head of property research Paul Braddick says the increase in confidence was probably driven largely by an improved outlook for the residential property market, with solid housing sales and positive house price growth in recent months. “In addition, a more stable global economic outlook and expectations of increased availability of debt finance is likely to have boosted expectations for construction activity and property capital growth in Victoria.”

Nonetheless, ANZ still expect property industry confidence to be weaker in the coming quarters. Braddick says it will be weighed down by a soft outlook for the state economy, further slowing in housing construction from the recent peak and a subdued outlook for retail spending and office employment.

However, Australian Property Buyers managing director Karin MacKay says the property market has definitely been on the rise, with inner city Melbourne houses in high demand – especially period houses in areas like Hawthorne and Camberwell. “It’s a good positive market at the moment. There was 1-2% growth last quarter. Individual properties are doing well. There always seems to be at least two bidders on properties at sale. This has all been impacting on prices.”

The crucial factor in this is the low interest rates, but Victoria’s high migration rates – with approximately 7000 people moving to the state each week – also help, she says. “Low interest rates are key to the improved market though. They are a big decision making factor for investors, particularly for first home buyers.”

MacKay believes it’s a great time to invest in property, with prices nearing the level the market had to offer in 2010 and a nearly 4% return on sales. “The only type of properties that don’t sell are overpriced properties where the vendors don’t have realistic expectations and are not prepared to negotiate.”

The area of the market not performing is that which includes the big apartment developments, she says. “They are still struggling. That is where oversupply is affecting prices, sales are quite slow and the market is not bouncing back as well.”

QUEENSLAND

Queensland’s flood myth.

As the state readies itself for the summer buying season, investors have to wonder if this year will again bring epic floods and if these waters will drown property values. The answer is somewhat surprising

Things slammed to a higher gear when the animal carcasses began washing up on the Capricorn Coast, near Rockhampton. Australia’s beef capital was in the midst of another devastating flood and a muddied Fitzroy River was ravaging everything within its path.

Rockhampton residents reported seeing their homes and backyards drowned in metres of water as the river swelled in from all sides. Roads became paddle-ways, fences turned to driftwood and a startling reality hit: this didn’t seem like a place where anybody would want to be a property owner.

That was January this year, and though an ensuing ‘mud army’ came in to clean the mess, the damage to house values promised to take longer to fix – or would it?

The latest RP Data figures show the city’s property values, in the ultimate irony, have not been severely affected by the flood.

Rockhampton property values in riverside areas such as Koongal, Depot Hill and the CBD appear to be no worse off than they were before the flood. Houses in the CBD have had just 2% shaved off their values in the 12 months to June, while the same period has seen Koongal and Depot Hill both witness a 12% increase in values. It begs the question: how much of an impact do floods really have on property values?

WESTERN AUSTRALIA

Perth vendors get shafted.

Valuers in Perth have been accused of being out of touch with a market where prices are soaring, bringing damaging repercussions for sellers.

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