O'Donoghues First National Real Estate Camberwell - Property News Update
This Property News Update is an excerpt from an email newsletter circulated to members of the First National Group of Independent Real Estate Agents on 22 August 2011 and we think it summarises some excellent points about the current state of the real estate market in Australia. O'Donoghues First National Real Estate in Camberwell is happy to provide further information about the local market in the City of Boroondara (which includes Ashburton, Balwyn, Balwyn North, Camberwell, Canterbury, Hawthorn, Hawthorn East, Kew, Kew East and parts of the suburbs of Glen Iris and Surrey Hills).
It seems the goal posts for the predicted property market crash keep moving.
Back in 2008 during the Global Financial Crisis (GFC), Australian property prices were supposed to crash by up to 40 per cent, just as they did in the USA and UK. Then, when prices rose, it was predicted there would be serious falls in 2009. Some said 10 per cent, others 20 per cent, and then Professor Stephen Keen chimed in with his now famous prediction of 40 per cent. The bidding war has continued, reaching predictions of a 60 per cent fall a few weeks ago.
None of this has happened yet the warnings from international economists continue to roll in.
For a moment it recently appeared as though the Reserve Bank might cut interest rates, but high inflation remains one of its primary concerns. The major banks have responded to the current crisis of confidence by sharpening their pencils but with international borrowing costs on the rise, this trend is unlikely to continue.
Despite the predictions of many analysts being patently wrong, major newspapers continue to add to their credibility by airing their views.
Three months ago, Fitch Ratings (US) reported mortgage arrears had shown a 30 per cent increase in the three months to March this year. This information was held up as evidence of trouble ahead and, let’s face it, a 30 per cent increase does sound like trouble. Many potential homebuyers would have interpreted that to mean distressed sales and distressed prices on the horizon.
However, it was not pointed out that the Fitch data referred only to the ‘low doc loan’ portion of Australia’s mortgages, only a tiny slice of the total mortgage market in this country, and that the actual arrears rate was 0.42 per cent, up from 0.29 per cent.
How is the average homeowner, investor or first homebuyer supposed to work that out?
Only one third of Australians have a mortgage.
If there were a 30 per cent increase in arrears across all mortgagees, nearly 2.4 million Australian households would be behind on their repayments. We wouldn’t need Fitch ratings to tell us about that; everybody would know somebody in arrears. Although that’s obviously not the case, it’s how it sounds.
So, while the analysts were looking for a property market collapse, the share market collapsed and the US has its credit rating downgraded instead. Where were those predictions? Where were the warnings about shares being so overvalued? In one week, $100 billion in value was lost from the Australian share market.
Perhaps a permissible observation is that while the Australian share market immediately followed the lead of overseas markets, the Australian property market continues not to follow overseas markets.
Looking at Australian Bureau of Statistics House Prices Indexes, while the share market has tanked, average house prices across Australian capital cities have fallen 0.1 per cent in the last quarter, which effectively means there’s been no change. Even Brisbane, taken in isolation, has fallen just 3.6 per cent in a year and everybody understands the January floods have a lot to do with that.
So, will the share market turmoil of the past two weeks and its impact on confidence make it harder to sell this spring?
According to a national survey by mortgage broker, Loan Market, 57 per cent of respondents say the proposed carbon tax affects their confidence in buying a property, chiefly due to concerns about an increased cost of living.
RP Data statistics show upper-end and prestige property prices are falling faster than more affordable market segments and many sales are taking place off the market, as agents sound out interest quietly.
Market activity will probably be slower than usual as people shelve plans to buy or sell, while they wait to see what happens.
However, high value sales are still being transacted and bullish prices paid in prime locations. On the Gold Coast, a five-bedroom waterfront recently achieved $1 million over the reserve price. But in Darwin, which recently had the strongest house price growth, prices have started to fall as 1300 houses languish on the market and investors wait for the next round of resources projects to begin.
Investor interest in residential property appears to have waned somewhat with June finance down 4.4 per cent. House building approvals also fell in June in all eastern states, most notably Victoria. Western Australia had a large increase of 11.3 per cent but this is unlikely to be sustained with private house approvals still trending down. There, buyers are cautious and need to be convinced the market has bottomed before committing.
Both the Queensland and New South Wales governments are attempting to stimulate investment and regional relocation with $7,000 grants apiece, the Queensland government printing trillions of dollars of fake money in a mail-out to promote its $140 million stimulus package to NSW and Victorian households.
This may have some effect, particularly as Generation Y is evidently prepared to shun the first homebuyers’ grant and buy an investment property instead. It seems if they can’t afford to buy the home they want, they’d prefer to be a landlord, but better landlords than the current crop the survey also suggested. Property Managers rejoice…
Without doubt, there will be buyers searching for opportunities throughout this spring, but homeowners would be well advised to work hard at presentation and to price their properties as keenly as possible. It’s that or risk stagnation in what is likely to be an unforgiving buyers’ market.
This spring, unless a home is special, really special, buyers are not likely to move on offerings they feel are above market value.
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