Against the backdrop of concerns over the global economy and weak consumer spending at home, the Reserve Bank opted to keep interest rates on hold today 4.75 per cent.
Many economists have tipped the Reserve Bank will now stay on the interest rate sidelines for at least a year and that if there is any movement, it will be down - but only if there is a sudden major shock to the economic outlook.
"Today's decision will certainly be welcomed by those with a mortgage," says Domain.com.au property expert Carolyn Boyd. "An increase in rates would have added unwelcome pressure for people trying to pay their mortgage. Households are becoming increasingly penny conscious - as can be seen by the recent spike in savings - and it really is true that every dollar counts."
Rates have been on hold since the Reserve Bank surprised borrowers with an increase on Melbourne Cup day last November.
Each 0.25 per cent interest rate rise adds another $60 to the monthly cost of an average Australian mortgage.
The official interest rate is now 4.75 per cent. Mortgage holders on variable interest rates are being charged a standard variable rate of about 7.83 per cent by their lenders.
Further details on what the decision to keep interest rates at 4.75 per cent means to you and the Australian property market will be outlined in this week's Domain.com.au Property Newsletter. If you are not already subscribed to our FREE weekly newsletter, click here to subscribe.
Robs Real Estate Report. Please enjoy the following articles I have included what I think are relevant and interesting to the Brisbane people and region.
Housing activity still in the doldrums
The number of new owner-occupier housing loans rose by one per cent in July after rising by 0.6 per cent in June. The number of loans is 5.4 per cent higher than a year ago.
Loans for the purchase of newly erected dwellings fell by one per cent. However, they were still down 7.8 per cent on a year ago. Loans for the construction of homes fell by 0.8 per cent in July to 4,757 – below the decade average of 4900.
Government spending fell by 0.4 per cent in the June quarter after lifting by 0.7 per cent in the March quarter.
The broad measure of Australia's external position – the current account – improved in the June quarter with the deficit narrowing from $11.1 billion to $7.4 billion. The trade sector will slice 0.5 percentage points from overall economic growth (GDP) in the June quarter. We expect that the economy expanded by 0.8 per cent in the June quarter.
What does it all mean?
The latest improvement in housing activity is encouraging. However, it by no means suggests a reversal of fortunes, especially given that the pickup in activity is off a low base. In addition, approvals are still down almost three per cent since the start of the year. And other metrics such as housing credit, auction clearance rates and building approvals have all been decidedly weak in recent times.
Housing credit is bouncing of the weakest levels in 34 years and the lack of activity in new construction is a clear dampener on the sector. The weakness in housing activity does have flow-on effects for other parts of the economy. Asset values are falling, share markets remain sluggish and the result is that consumer confidence is at two-year lows. And looking forward, businesses will continue to find conditions tough.
At present, it is clear that the housing sector is decidedly weak, and the latest improvement in housing finance at most only provides a modest degree of hope going forward. Aussie consumers were already hesitant about spending, and the sustained drop in home prices and weakness in share markets will entrench the current mood of nervousness across the country.
It is important to remember that the Reserve Bank has raised interest rates just once in the past 16 months yet an array of sectors are unwilling to borrow and spending remains subdued. Clearly, rate hikes are off the agenda for the next few months. However, it is interesting to note that financial market participants are getting more dovish with overnight indexed swaps factoring almost four interest rate cuts with the cash rate falling to 3.75 per cent in a year’s time.
It is likely that the Australian economy expanded in the June quarter, returning to growth after the floods and cyclone knocked around the growth estimates in the March quarter. Overall, we are tipping growth of around 0.8 per cent – only a partial rebound after the 1.2 per cent contraction in the March quarter. Clearly the domestic economy has lost momentum with annualised growth likely to post at around 0.4 per cent, and even the Reserve Bank is not expecting a robust recovery to take place until early 2012.
What do the figures show?
The number of new owner-occupier housing loans rose by one per cent in July holding at 49,813 new commitments. However, the number of new loans has still fallen by 2.6 per cent since the start of the year. The number of loans is now up 5.4 per cent higher than a year ago.
Loans for the construction of homes fell by 0.8 per cent in July to 4,757 – below the decade average of 4900. Loans for the purchase of established dwellings (ex refinancing) rose by 0.6 per cent, while loans for the purchase of newly erected dwellings fell by one per cent. Newly erected home purchases are now down 7.8 per cent on year ago.
The value of new housing commitments (owner-occupier and investment) rose by 1.6 per cent in July. Owner-occupier loans rose by 1.4 per cent while investment loans rose by 1.9 per cent.
Banks accounted for 92.7 per cent of all loans taken out in July, up from 92.5 per cent in June.
The proportion of first homebuyers in the market held steady at 15.2 per cent in July – well below the decade average of 18.2 per cent. Fixed rate loans accounted for just 6.3 per cent of all loans in July, down from 6.5 per cent of loans. And the average home loan across Australia stood at $293,400, up one per cent on a year ago.
Government consumption spending rose by 0.9 per cent in the June quarter after a 0.8 per cent lift in the March quarter. But total public investment fell by 3.8 per cent in the June quarter after a small 0.3 per cent lift in the March quarter. Overall, spending by the government sector fell by 0.4 per cent in the quarter.
The broad measure of Australia's external position - the current account – improved in the June quarter. The current account deficit narrowed by $3696 million to $7419 million in the June quarter. The balance of goods and services surplus rose from $2747 million to $5599 million. But the net income deficit improved by $870 million.
In the June quarter, the current account deficit narrowed from 3.2 per cent to 2.1 per cent of GDP.
In the June quarter, exports of goods and services rose by 2.6 per cent. Goods fell 3 per cent with services up 0.2 per cent. Imports rose by 4.3 per cent in the quarter. The trade sector (exports less imports) will slice 0.5 percentage points from economic growth in the June quarter.
Export prices rose by 5.4 per cent in the June quarter (goods up 6.2 per cent, services up 1.2 per cent) but import prices were flat (goods up 0.5 per cent, services down 1.9 per cent).
The terms of trade (ratio of export prices to import prices) rose by 5.4 per cent to a record high of 122.6 in the June quarter.
Net foreign debt rose by $0.4 billion to $675 billion in the June quarter. New transactions added $1.3 billion, price changes added $6.2 billion, exchange rate changes subtracted $7.7 billion and other changes added $0.6 billion. Net foreign debt held steady at 49.4 per cent of GDP.
What is the importance of the economic data?
Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally, people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
The quarterly Balance of Payments figures have few short-term effects on financial markets. The importance of the data is merely to highlight Australia’s trading position with the rest of the world as well as the contribution of foreign trade (exports less imports) to the latest estimates of economic growth. Trade has been a drag on economic growth over the past four years with a lack of productive capacity holding back exports while rising incomes have boosted imports.
What are the implications for interest rates and investors?
Interest rates are on hold. That is without question. All the data over the past month portrays an economy that has lost momentum. The terms of trade may be at record highs, but in the suburbs that doesn’t pay the bills or get people out to the shopping malls, car yards or real estate agents.
Over the past eight months, it is clear that conditions in the housing sector have been soft. Buyers have been holding off on purchases in all areas. Loans for the construction of new dwellings – a key forward looking indicator of home building – is still down on a year ago. And loans to purchase newly established dwellings are still down a cumulative 16.8 per cent in the past eight months. Clearly it is too early to claim a revival in the fortunes of the housing sector and the sustained weakness in house prices is unlikely to turn around anytime soon.
The biggest risk in the current environment is that people will lose confidence and retreat further into their burrows. Australia can’t afford the ‘new conservatism’ taking hold in a major way.
The Reserve Bank has already acknowledged that the economy is softer than it had previously thought and the prospect of rate cuts cannot be ruled out if activity levels deteriorate further.
Loans for the purchase of newly erected dwellings fell by one per cent. However, they were still down 7.8 per cent on a year ago. Loans for the construction of homes fell by 0.8 per cent in July to 4,757 – below the decade average of 4900.
Government spending fell by 0.4 per cent in the June quarter after lifting by 0.7 per cent in the March quarter.
The broad measure of Australia's external position – the current account – improved in the June quarter with the deficit narrowing from $11.1 billion to $7.4 billion. The trade sector will slice 0.5 percentage points from overall economic growth (GDP) in the June quarter. We expect that the economy expanded by 0.8 per cent in the June quarter.
What does it all mean?
The latest improvement in housing activity is encouraging. However, it by no means suggests a reversal of fortunes, especially given that the pickup in activity is off a low base. In addition, approvals are still down almost three per cent since the start of the year. And other metrics such as housing credit, auction clearance rates and building approvals have all been decidedly weak in recent times.
Housing credit is bouncing of the weakest levels in 34 years and the lack of activity in new construction is a clear dampener on the sector. The weakness in housing activity does have flow-on effects for other parts of the economy. Asset values are falling, share markets remain sluggish and the result is that consumer confidence is at two-year lows. And looking forward, businesses will continue to find conditions tough.
At present, it is clear that the housing sector is decidedly weak, and the latest improvement in housing finance at most only provides a modest degree of hope going forward. Aussie consumers were already hesitant about spending, and the sustained drop in home prices and weakness in share markets will entrench the current mood of nervousness across the country.
It is important to remember that the Reserve Bank has raised interest rates just once in the past 16 months yet an array of sectors are unwilling to borrow and spending remains subdued. Clearly, rate hikes are off the agenda for the next few months. However, it is interesting to note that financial market participants are getting more dovish with overnight indexed swaps factoring almost four interest rate cuts with the cash rate falling to 3.75 per cent in a year’s time.
It is likely that the Australian economy expanded in the June quarter, returning to growth after the floods and cyclone knocked around the growth estimates in the March quarter. Overall, we are tipping growth of around 0.8 per cent – only a partial rebound after the 1.2 per cent contraction in the March quarter. Clearly the domestic economy has lost momentum with annualised growth likely to post at around 0.4 per cent, and even the Reserve Bank is not expecting a robust recovery to take place until early 2012.
What do the figures show?
The number of new owner-occupier housing loans rose by one per cent in July holding at 49,813 new commitments. However, the number of new loans has still fallen by 2.6 per cent since the start of the year. The number of loans is now up 5.4 per cent higher than a year ago.
Loans for the construction of homes fell by 0.8 per cent in July to 4,757 – below the decade average of 4900. Loans for the purchase of established dwellings (ex refinancing) rose by 0.6 per cent, while loans for the purchase of newly erected dwellings fell by one per cent. Newly erected home purchases are now down 7.8 per cent on year ago.
The value of new housing commitments (owner-occupier and investment) rose by 1.6 per cent in July. Owner-occupier loans rose by 1.4 per cent while investment loans rose by 1.9 per cent.
Banks accounted for 92.7 per cent of all loans taken out in July, up from 92.5 per cent in June.
The proportion of first homebuyers in the market held steady at 15.2 per cent in July – well below the decade average of 18.2 per cent. Fixed rate loans accounted for just 6.3 per cent of all loans in July, down from 6.5 per cent of loans. And the average home loan across Australia stood at $293,400, up one per cent on a year ago.
Government consumption spending rose by 0.9 per cent in the June quarter after a 0.8 per cent lift in the March quarter. But total public investment fell by 3.8 per cent in the June quarter after a small 0.3 per cent lift in the March quarter. Overall, spending by the government sector fell by 0.4 per cent in the quarter.
The broad measure of Australia's external position - the current account – improved in the June quarter. The current account deficit narrowed by $3696 million to $7419 million in the June quarter. The balance of goods and services surplus rose from $2747 million to $5599 million. But the net income deficit improved by $870 million.
In the June quarter, the current account deficit narrowed from 3.2 per cent to 2.1 per cent of GDP.
In the June quarter, exports of goods and services rose by 2.6 per cent. Goods fell 3 per cent with services up 0.2 per cent. Imports rose by 4.3 per cent in the quarter. The trade sector (exports less imports) will slice 0.5 percentage points from economic growth in the June quarter.
Export prices rose by 5.4 per cent in the June quarter (goods up 6.2 per cent, services up 1.2 per cent) but import prices were flat (goods up 0.5 per cent, services down 1.9 per cent).
The terms of trade (ratio of export prices to import prices) rose by 5.4 per cent to a record high of 122.6 in the June quarter.
Net foreign debt rose by $0.4 billion to $675 billion in the June quarter. New transactions added $1.3 billion, price changes added $6.2 billion, exchange rate changes subtracted $7.7 billion and other changes added $0.6 billion. Net foreign debt held steady at 49.4 per cent of GDP.
What is the importance of the economic data?
Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally, people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
The quarterly Balance of Payments figures have few short-term effects on financial markets. The importance of the data is merely to highlight Australia’s trading position with the rest of the world as well as the contribution of foreign trade (exports less imports) to the latest estimates of economic growth. Trade has been a drag on economic growth over the past four years with a lack of productive capacity holding back exports while rising incomes have boosted imports.
What are the implications for interest rates and investors?
Interest rates are on hold. That is without question. All the data over the past month portrays an economy that has lost momentum. The terms of trade may be at record highs, but in the suburbs that doesn’t pay the bills or get people out to the shopping malls, car yards or real estate agents.
Over the past eight months, it is clear that conditions in the housing sector have been soft. Buyers have been holding off on purchases in all areas. Loans for the construction of new dwellings – a key forward looking indicator of home building – is still down on a year ago. And loans to purchase newly established dwellings are still down a cumulative 16.8 per cent in the past eight months. Clearly it is too early to claim a revival in the fortunes of the housing sector and the sustained weakness in house prices is unlikely to turn around anytime soon.
The biggest risk in the current environment is that people will lose confidence and retreat further into their burrows. Australia can’t afford the ‘new conservatism’ taking hold in a major way.
The Reserve Bank has already acknowledged that the economy is softer than it had previously thought and the prospect of rate cuts cannot be ruled out if activity levels deteriorate further.
That’s Not a Landbank, It’s a Housing Glut
“PROPERTY speculators have locked up 46,220 empty homes in metropolitan Melbourne, the housing campaign group Earthsharing Australia says.
“In a documentary soon to be released, Real Estate 4 Ransom, the group says that 4.95 per cent of the city's potential housing stock is unoccupied, double the rental vacancy rate of 2.4 per cent published last week by the Real Estate Institute of Victoria.” – The Age
Personally, we don’t believe a word of it.
You know we’ve criticised property investors for their unwavering belief that property prices always go up. And even if they don’t go up, they’ll never fall.
But we don’t believe for one minute – not even one second – landlords are purposely leaving properties vacant.
Instead, it proves two things we’ve said all along…
House price indices hiding the housing bust
First, that Australian housing is experiencing the consequences of a price bubble.
And second, there isn’t a housing shortage.
Before we go into the details, it’s important to make one point. Do not, under any circumstances rely on house price indices to give an accurate gauge of house prices.
If you believe the indices you’d think house prices have had a steady decline… that Melbourne prices are only down about 1-3%... that Sydney prices have gone up a bit… and Perth prices are only down 6%.
The reality is far different. If you’ve kept your eye on the property market – as we have – you’ll know prices in many suburbs have fallen much further. And those who refuse to cut the price are, well, taking a price cut anyway.
How?
Because they’re paying more in interest charges.
You see this all the time. Folks hang out for the extra $20-30 thousand they believe their house is worth. But because it takes them an extra six months to sell the place, even if they get the asking price they’ve most likely paid more than 20 grand in extra interest repayments.
But more likely is after six months they work out they ain’t gonna get the asking price. So not only do they sell at a lower price… but they’ve just forked out an extra six months of interest to the bank.
That’s the real danger of using housing indices to gauge the market. It’s made sellers foolishly think they’ll get the same price their neighbour got when they sold two years ago – “House prices are flat...” or “House prices are only down 1%...”
Sorry home owners, house prices are in a hole… a deep hole.
Which is why, as we’ve said for the last few months, if you’re patient and you’re not over-extending yourself, there are some good value homes on the market right now. We won’t say they’re cheap. And we won’t say prices can’t fall further.
But as long as you’re not going into it with the old-fashioned belief that house prices double every seven years, you’re more likely to pay a sensible price. Because we mean it, house prices will not double over the next seven years.
If you’re lucky, your discounted purchase will be the same price as it is today. More likely it’ll be cheaper. So the attitude you need to take is that making mortgage payments will be similar to making rental payments. In other words, you’re paying a price for shelter.
And because shelter is a consumption item, that makes it a cost (liability)… and not an asset.
But let’s get back to today’s story in The Age – the idea that speculators are purposely leaving properties vacant.
Housing shortage doesn’t exist
It’s nonsense. They’re doing no such thing… or not intentionally anyway.
The high vacancy rate just shows there isn’t a housing shortage. Those properties are vacant because the landlord has an unrealistic idea of the price people will pay for shelter.
The vacancy rates and high rents are just a result of a housing bubble. Investors leverage up and pay any old price in the belief house prices double every seven years. But soon enough the investor figures out they’ve paid too much and can’t afford the mortgage.
Their only option is to charge high rents to offset some of the cost. And why wouldn’t they… there’s a housing and rental shortage… renters will surely pay any stupid price… they’re desperate… right? Turns out renters aren’t so desperate after all.
Because there is not a housing or rental shortage. This means renters can be choosy. And right now, they’re being choosy.
They don’t need to pay the inflated prices demanded by some landlords when they can shop around for a cheaper price somewhere else. And that means those high-rent properties remain vacant.
But that’s not all. It gets worse for the “hold-out” landlords…
Because there are so many landlords in Australia there’s zero chance of a landlord cartel forming. The landlords who wise up to the madness or aren’t as leveraged as the peak buyers can afford to drop their rents… or charge realistic market prices.
So at some point the super-leveraged landlords will have to give in. They’ll either sell at a loss or drop the rent to at least get some cash flow coming in… and then pray house prices go up again.
You see, land banking only works if asset values continue to rise… and if the rising value outpaces holding costs.
At this point in the housing market, land banking with leverage just isn’t profitable. Many landlords have already figured this out. And the rest will soon get the hang of it.
It’s like buying shares in a margin-lending account during a time when there’s no market growth. If the stock pays a dividend you’ll claw back some of the holding costs. But if it doesn’t pay a dividend then it’s the same as having an investment property without a tenant… it’s a loss maker.
Greater fools taking a bath
In short, it’s nothing more than an extension of the Greater Fool theory. The idea that it doesn’t matter how much you pay for something there will always be someone else who’ll buy it from you at a higher price.
Speculators who thought they could get rich flipping properties have taken a bath, holding stock that’s now fallen in value. And now speculators who thought they could charge enormous rents due to a so-called housing shortage and rental boom are taking the same bath – we hope the water’s clean!
Of course, it’s not all bad news for property investors. If you’ve got no or low leverage on the property you can take the hit or drop the rent to the market price easier than the over-leveraged landlords.
All up, we don’t know what point the lobby group mentioned in the report is trying to make. But it seems to us it’s just helping to prolong the housing shortage myth.
As we’ve said all along, it’s not the availability of housing that’s the problem. It’s the overblown expectations of investors and landlords who think they can charge any old rent and expect tenants to pay up.
Unfortunately for them, they’re learning a lesson the hard way.
Cheers.
Kris Sayce
Money Morning Australia
“In a documentary soon to be released, Real Estate 4 Ransom, the group says that 4.95 per cent of the city's potential housing stock is unoccupied, double the rental vacancy rate of 2.4 per cent published last week by the Real Estate Institute of Victoria.” – The Age
Personally, we don’t believe a word of it.
You know we’ve criticised property investors for their unwavering belief that property prices always go up. And even if they don’t go up, they’ll never fall.
But we don’t believe for one minute – not even one second – landlords are purposely leaving properties vacant.
Instead, it proves two things we’ve said all along…
House price indices hiding the housing bust
First, that Australian housing is experiencing the consequences of a price bubble.
And second, there isn’t a housing shortage.
Before we go into the details, it’s important to make one point. Do not, under any circumstances rely on house price indices to give an accurate gauge of house prices.
If you believe the indices you’d think house prices have had a steady decline… that Melbourne prices are only down about 1-3%... that Sydney prices have gone up a bit… and Perth prices are only down 6%.
The reality is far different. If you’ve kept your eye on the property market – as we have – you’ll know prices in many suburbs have fallen much further. And those who refuse to cut the price are, well, taking a price cut anyway.
How?
Because they’re paying more in interest charges.
You see this all the time. Folks hang out for the extra $20-30 thousand they believe their house is worth. But because it takes them an extra six months to sell the place, even if they get the asking price they’ve most likely paid more than 20 grand in extra interest repayments.
But more likely is after six months they work out they ain’t gonna get the asking price. So not only do they sell at a lower price… but they’ve just forked out an extra six months of interest to the bank.
That’s the real danger of using housing indices to gauge the market. It’s made sellers foolishly think they’ll get the same price their neighbour got when they sold two years ago – “House prices are flat...” or “House prices are only down 1%...”
Sorry home owners, house prices are in a hole… a deep hole.
Which is why, as we’ve said for the last few months, if you’re patient and you’re not over-extending yourself, there are some good value homes on the market right now. We won’t say they’re cheap. And we won’t say prices can’t fall further.
But as long as you’re not going into it with the old-fashioned belief that house prices double every seven years, you’re more likely to pay a sensible price. Because we mean it, house prices will not double over the next seven years.
If you’re lucky, your discounted purchase will be the same price as it is today. More likely it’ll be cheaper. So the attitude you need to take is that making mortgage payments will be similar to making rental payments. In other words, you’re paying a price for shelter.
And because shelter is a consumption item, that makes it a cost (liability)… and not an asset.
But let’s get back to today’s story in The Age – the idea that speculators are purposely leaving properties vacant.
Housing shortage doesn’t exist
It’s nonsense. They’re doing no such thing… or not intentionally anyway.
The high vacancy rate just shows there isn’t a housing shortage. Those properties are vacant because the landlord has an unrealistic idea of the price people will pay for shelter.
The vacancy rates and high rents are just a result of a housing bubble. Investors leverage up and pay any old price in the belief house prices double every seven years. But soon enough the investor figures out they’ve paid too much and can’t afford the mortgage.
Their only option is to charge high rents to offset some of the cost. And why wouldn’t they… there’s a housing and rental shortage… renters will surely pay any stupid price… they’re desperate… right? Turns out renters aren’t so desperate after all.
Because there is not a housing or rental shortage. This means renters can be choosy. And right now, they’re being choosy.
They don’t need to pay the inflated prices demanded by some landlords when they can shop around for a cheaper price somewhere else. And that means those high-rent properties remain vacant.
But that’s not all. It gets worse for the “hold-out” landlords…
Because there are so many landlords in Australia there’s zero chance of a landlord cartel forming. The landlords who wise up to the madness or aren’t as leveraged as the peak buyers can afford to drop their rents… or charge realistic market prices.
So at some point the super-leveraged landlords will have to give in. They’ll either sell at a loss or drop the rent to at least get some cash flow coming in… and then pray house prices go up again.
You see, land banking only works if asset values continue to rise… and if the rising value outpaces holding costs.
At this point in the housing market, land banking with leverage just isn’t profitable. Many landlords have already figured this out. And the rest will soon get the hang of it.
It’s like buying shares in a margin-lending account during a time when there’s no market growth. If the stock pays a dividend you’ll claw back some of the holding costs. But if it doesn’t pay a dividend then it’s the same as having an investment property without a tenant… it’s a loss maker.
Greater fools taking a bath
In short, it’s nothing more than an extension of the Greater Fool theory. The idea that it doesn’t matter how much you pay for something there will always be someone else who’ll buy it from you at a higher price.
Speculators who thought they could get rich flipping properties have taken a bath, holding stock that’s now fallen in value. And now speculators who thought they could charge enormous rents due to a so-called housing shortage and rental boom are taking the same bath – we hope the water’s clean!
Of course, it’s not all bad news for property investors. If you’ve got no or low leverage on the property you can take the hit or drop the rent to the market price easier than the over-leveraged landlords.
All up, we don’t know what point the lobby group mentioned in the report is trying to make. But it seems to us it’s just helping to prolong the housing shortage myth.
As we’ve said all along, it’s not the availability of housing that’s the problem. It’s the overblown expectations of investors and landlords who think they can charge any old rent and expect tenants to pay up.
Unfortunately for them, they’re learning a lesson the hard way.
Cheers.
Kris Sayce
Money Morning Australia
Real Estate Report - 11/07/11
Good news for borrowers, the Reserve Bank has left rates on hold at 4.75 per cent. The Governor says that growth in 2011, "is unlikely to be as strong as earlier forecast". Each quarter of a per cent interest rate rise adds another $60 to the monthly cost of the average Australian mortgage. With the official interest rate steady at 4.75 per cent, most mortgage holders are being charged a standard variable rate of 7.83 per cent by lenders.
Building approvals have hit a two year low. Dwelling approvals fell more than anticipated, with a 7.9 per cent fall in May. Approvals have now fallen 14.5 per cent this year. Building approval rates in Victoria and NSW fell significantly. Western Australia and South Australia posted modest gains. Weakness was concentrated in the volatile private sector units component falling just over 20 per cent – comprising of multi-unit apartment developments. The more stable seasonally adjusted estimate for private sector houses approved rose 0.7 per cent in May. Renovation approvals is trending higher at a 10 per cent annual pace, with Queensland activity after the floods a clear driver.
The Australian Industry Group Australian Performance of Construction Index in conjunction with the Housing Industry Association dropped 3.8 points in June to 35.8. It’s the thirteenth month in a row below the 50 threshold separating growth and contraction. HIA said potential interest rate rises and consumer caution have been subduing the market.
The Housing Industry Association’s report card has forecast a fall of 13 per cent in housing starts over the two year period from mid 2010 to mid 2012. On a more positive note the renovations segment of the housing market is forecast to grow 2.7 percent in the 2011 financial year.
Now to the Carbon Tax, HIA estimates it will increase the cost of the average new home by between $5000 and $6000 based on a $20 per tonne carbon price. More details to follow in the coming weeks.
Building approvals have hit a two year low. Dwelling approvals fell more than anticipated, with a 7.9 per cent fall in May. Approvals have now fallen 14.5 per cent this year. Building approval rates in Victoria and NSW fell significantly. Western Australia and South Australia posted modest gains. Weakness was concentrated in the volatile private sector units component falling just over 20 per cent – comprising of multi-unit apartment developments. The more stable seasonally adjusted estimate for private sector houses approved rose 0.7 per cent in May. Renovation approvals is trending higher at a 10 per cent annual pace, with Queensland activity after the floods a clear driver.
The Australian Industry Group Australian Performance of Construction Index in conjunction with the Housing Industry Association dropped 3.8 points in June to 35.8. It’s the thirteenth month in a row below the 50 threshold separating growth and contraction. HIA said potential interest rate rises and consumer caution have been subduing the market.
The Housing Industry Association’s report card has forecast a fall of 13 per cent in housing starts over the two year period from mid 2010 to mid 2012. On a more positive note the renovations segment of the housing market is forecast to grow 2.7 percent in the 2011 financial year.
Now to the Carbon Tax, HIA estimates it will increase the cost of the average new home by between $5000 and $6000 based on a $20 per tonne carbon price. More details to follow in the coming weeks.
Newsletter
Home sales lift
• New home sales rose by 4.3 per cent in March after rising by 0.6 per cent in February. Private sector house sales rose by 5.8 per cent in March while multi-unit sales dropped by 10 per cent. New home sales are still down 5.1 per cent on a year ago.
• The Performance of Services index rose by 5 points to 51.5 in April – marking the first expansion in the sector in six months. Key sub indices, sales and new orders contracted at a slower pace, while employment recorded its best reading in over six years.
• New home sales rose by 4.3 per cent in March after rising by 0.6 per cent in February. Private sector house sales rose by 5.8 per cent in March while multi-unit sales dropped by 10 per cent. New home sales are still down 5.1 per cent on a year ago.
• The Performance of Services index rose by 5 points to 51.5 in April – marking the first expansion in the sector in six months. Key sub indices, sales and new orders contracted at a slower pace, while employment recorded its best reading in over six years.
What does it all mean?
• All the data today points to an economy that seems to be attempting to recover from the rapid rate hikes of last year. The 4.3 per cent rise in new homes sales is a welcome sight given that activity levels have been subdued over the past year.
• Despite the pickup in home sales, the housing sector is in for a extended period of consolidation. Housing finance - a good indicator of future home sales - has come of the boil and property prices recorded its biggest quarterly fall in years over the March quarter. In addition new home sales are still down over 5 per cent on a year ago.
• Fundamentally, there are good reasons for home building to increase. The rental market is still tight and population growth is healthy. And with the labour market remaining strong, investor housing demand is likely to pickup pace in the second half of 2011.
• The services sector is growing for the first time in six months. However you cannot really read too much into what on face value looks like an encouraging result. Especially given that the service sector has been doing it tough over the past year and the latest improvement comes after a bout of serious weakness. In addition key sub indices like sales and forward orders are still contracting, albeit at a slower pace.
• Official interest rates have been on hold for six months and no doubt the lack of rate hikes is allowing businesses and consumers to get back to basics. However there are a couple of factors that will ensure activity remains relatively subdued in the near term, including a stronger currency, conservative buying behaviour of consumers and businesses and the added pressures on the household budget.
• Businesses are under substantial pressure at present with costs edging higher and consumers driving hard bargains. Input costs and wages remain elevated but selling prices are only modestly rising. In fact the wages sub index of the service survey recorded its highest reading in almost three years. A further period of interest rate stability would clearly help the situation.
• The general perception is that food prices only go one way – and that’s up. But surprisingly almost 40 per cent of commonly purchased weekly retail items like grocery items, alcohol and petrol actually fell in price during the March quarter. And if it wasn’t for the floods and cyclone, the proportion of items falling in price would have been even higher. It certainly pays to look more closely at prices of the goods we buy, rather than to just take the advice of so-called “experts” that inflation is on the rise.
• The slide in car sales in April cannot be looked at on its own given the timing of Easter. This year Easter occurred super late compared with last year coupled with a five day long weekend. Unfortunately seasonal adjustment programs find it difficult to account for the “Easter effect”, so it may result in super-strong results in March followed by a weaker result in April. Clearly it will be a case of adding the two months together to find out what is happening. Overall CommSec estimates car sales fell by 1 per cent in seasonally adjusted terms in April.
• All the data today points to an economy that seems to be attempting to recover from the rapid rate hikes of last year. The 4.3 per cent rise in new homes sales is a welcome sight given that activity levels have been subdued over the past year.
• Despite the pickup in home sales, the housing sector is in for a extended period of consolidation. Housing finance - a good indicator of future home sales - has come of the boil and property prices recorded its biggest quarterly fall in years over the March quarter. In addition new home sales are still down over 5 per cent on a year ago.
• Fundamentally, there are good reasons for home building to increase. The rental market is still tight and population growth is healthy. And with the labour market remaining strong, investor housing demand is likely to pickup pace in the second half of 2011.
• The services sector is growing for the first time in six months. However you cannot really read too much into what on face value looks like an encouraging result. Especially given that the service sector has been doing it tough over the past year and the latest improvement comes after a bout of serious weakness. In addition key sub indices like sales and forward orders are still contracting, albeit at a slower pace.
• Official interest rates have been on hold for six months and no doubt the lack of rate hikes is allowing businesses and consumers to get back to basics. However there are a couple of factors that will ensure activity remains relatively subdued in the near term, including a stronger currency, conservative buying behaviour of consumers and businesses and the added pressures on the household budget.
• Businesses are under substantial pressure at present with costs edging higher and consumers driving hard bargains. Input costs and wages remain elevated but selling prices are only modestly rising. In fact the wages sub index of the service survey recorded its highest reading in almost three years. A further period of interest rate stability would clearly help the situation.
• The general perception is that food prices only go one way – and that’s up. But surprisingly almost 40 per cent of commonly purchased weekly retail items like grocery items, alcohol and petrol actually fell in price during the March quarter. And if it wasn’t for the floods and cyclone, the proportion of items falling in price would have been even higher. It certainly pays to look more closely at prices of the goods we buy, rather than to just take the advice of so-called “experts” that inflation is on the rise.
• The slide in car sales in April cannot be looked at on its own given the timing of Easter. This year Easter occurred super late compared with last year coupled with a five day long weekend. Unfortunately seasonal adjustment programs find it difficult to account for the “Easter effect”, so it may result in super-strong results in March followed by a weaker result in April. Clearly it will be a case of adding the two months together to find out what is happening. Overall CommSec estimates car sales fell by 1 per cent in seasonally adjusted terms in April.
What do the figures show?
Quarterly retail prices:
• The Bureau of Statistics has released average prices for 51 key consumer products for the March quarter, ranging from bananas to beer and even petrol. Using averages for the eight capital cities, CommSec has calculated that 32 of the 51 items rose in price during the quarter while the remaining 19 items actually became cheaper. The biggest price increase was by bananas (up 89.8 per cent), followed by oranges (up 19.3 per cent) and onions (up 12.5 per cent). At the other end of the scale, the price of milk fell by 14.5 per cent in the quarter, followed by baked beans (down 7.4 per cent) and tinned peaches (down 4.2 per cent).
• Other notable price changes: petrol (up 8.3 per cent), packaged beer (down 0.9 per cent), bread (down 1.1 per cent), T-bone steak (down 2.4 per cent), free range eggs (down 3.3 per cent).
Car sales
• The Federal Chamber of Automotive Industries reported that 74,214 new cars were sold in April, down 8.8 per cent on a year ago. Passenger car sales were 11.9 per cent lower than a year ago, 4WDs were down 5.6 per cent and “other vehicles” (trucks, utes etc) were down 3.6 per cent.
New home sales
• The Housing Industry Association reported that new home sales rose by 4.3 per cent in March after a 0.6 per cent rise in February. Private sector detached house sales rose by 5.8 per cent in March while multi-unit sales dropped by 10 per cent.
• Across the states detached new house sales increased by: 13.5 per cent in New South Wales, 11.1 per cent in Queensland, 3.6 per cent in Victoria, and 3.1 per cent in Western Australia. Sales fell by 6.4 per cent in South Australia
• The Housing Industry Association noted that “The volume of new home sales remains subdued, within which the stronger result for March is certainly a welcome outcome.”
Performance of Services
• The Performance of Services index rose by 5 points in April to 51.5, marking the first expansion in the sector in six months. The key 50.0 level separates expansion from contraction. Sales and new orders contracted at a slower pace, while employment recorded its best reading in over six years.
• Selling prices rose modestly while wages accelerated sharply with the sub index recording its highest reading in wages and selling prices were higher.
What is the importance of the economic data?
• The Federal Chamber of Automotive Industries release figures on new car sales at the start of each month. The data is useful in gauging consumer spending behaviour.
• The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia's largest 100 home builders.
• The Performance of Services index is released by Australian Industry Group and the Commonwealth Bank each month. The PSI is designed to provide a guide to conditions in retail, financial and other service sectors.
Quarterly retail prices:
• The Bureau of Statistics has released average prices for 51 key consumer products for the March quarter, ranging from bananas to beer and even petrol. Using averages for the eight capital cities, CommSec has calculated that 32 of the 51 items rose in price during the quarter while the remaining 19 items actually became cheaper. The biggest price increase was by bananas (up 89.8 per cent), followed by oranges (up 19.3 per cent) and onions (up 12.5 per cent). At the other end of the scale, the price of milk fell by 14.5 per cent in the quarter, followed by baked beans (down 7.4 per cent) and tinned peaches (down 4.2 per cent).
• Other notable price changes: petrol (up 8.3 per cent), packaged beer (down 0.9 per cent), bread (down 1.1 per cent), T-bone steak (down 2.4 per cent), free range eggs (down 3.3 per cent).
Car sales
• The Federal Chamber of Automotive Industries reported that 74,214 new cars were sold in April, down 8.8 per cent on a year ago. Passenger car sales were 11.9 per cent lower than a year ago, 4WDs were down 5.6 per cent and “other vehicles” (trucks, utes etc) were down 3.6 per cent.
New home sales
• The Housing Industry Association reported that new home sales rose by 4.3 per cent in March after a 0.6 per cent rise in February. Private sector detached house sales rose by 5.8 per cent in March while multi-unit sales dropped by 10 per cent.
• Across the states detached new house sales increased by: 13.5 per cent in New South Wales, 11.1 per cent in Queensland, 3.6 per cent in Victoria, and 3.1 per cent in Western Australia. Sales fell by 6.4 per cent in South Australia
• The Housing Industry Association noted that “The volume of new home sales remains subdued, within which the stronger result for March is certainly a welcome outcome.”
Performance of Services
• The Performance of Services index rose by 5 points in April to 51.5, marking the first expansion in the sector in six months. The key 50.0 level separates expansion from contraction. Sales and new orders contracted at a slower pace, while employment recorded its best reading in over six years.
• Selling prices rose modestly while wages accelerated sharply with the sub index recording its highest reading in wages and selling prices were higher.
What is the importance of the economic data?
• The Federal Chamber of Automotive Industries release figures on new car sales at the start of each month. The data is useful in gauging consumer spending behaviour.
• The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia's largest 100 home builders.
• The Performance of Services index is released by Australian Industry Group and the Commonwealth Bank each month. The PSI is designed to provide a guide to conditions in retail, financial and other service sectors.
What are the implications for interest rates and investors?
• Interest rates are already restrictive and the Reserve Bank would be best staying on the interest rate sidelines in the near term – especially given that inflation is well contained at present. Food inflation is an issue in other parts of the world however it is still well contained domestically. The floods in Queensland together with Cyclone Yasi have led to price rises for a select number of fruit and vegetable products, but prices have already started to fall.
• The cumulative rate hikes, hangover effect from the expiry of the first home buyer grant and appreciation in property prices has given potential home buyers a valid reason to be more circumspect about future purchases. However the rebuilding phase in flood ravaged towns is likely to support construction activity in the midterm.
• Interest rates are already restrictive and the Reserve Bank would be best staying on the interest rate sidelines in the near term – especially given that inflation is well contained at present. Food inflation is an issue in other parts of the world however it is still well contained domestically. The floods in Queensland together with Cyclone Yasi have led to price rises for a select number of fruit and vegetable products, but prices have already started to fall.
• The cumulative rate hikes, hangover effect from the expiry of the first home buyer grant and appreciation in property prices has given potential home buyers a valid reason to be more circumspect about future purchases. However the rebuilding phase in flood ravaged towns is likely to support construction activity in the midterm.
Source: Paidonexchange.com.au
Australia's fastest growing regions
Over the 12 months to June 2009 and in raw number terms the states which recorded the greatest growth in population were: New South Wales (119,534), Queensland (116,533), Victoria (116,250) and Western Australia (68,077).
In this week’s blog we take a look at the trends in regional population growth analyzing the 25 fastest growing Local Government Areas (LGA) of the country based on the total increase in population.
In Queensland the LGA’s tend to be larger (especially after recent amalgamations) and Queensland LGA’s occupy four of the top five positions of fastest growing areas. Six of the eight Queensland LGA’s are located in the south-east corner of the state and the remaining two are the large regional cities in North Queensland (Townsville and Cairns).
New South Wales recorded five regions within the top 25 fastest growing LGA’s, all of which were situated within the Sydney metro area and most were situated in the outskirts of the City in areas which are relatively affordable. The exception was the Sydney LGA which is recording strong population growth thanks to inner city densification.
Western Australia had three LGA’s on the list all of which were located in the outer precincts and can be broadly described as providing more affordable housing than areas close to the city.
Finally in the Australian Capital Territory the Unincorporated ACT LGA, which covers most of the Territory, was the nation’s 13th fastest growing LGA during the period.
The clear trend is that populations are tending to grow the most in the outer more affordable regions of our major population centres. It’s not really surprising given that these major regions have the largest amount of land available for greenfield development, the strongest job prospects and most abundant amenity. In saying this, poor infrastructure provision in these areas often makes travelling around the city difficult and time consuming
We would expect these trends to continue however, we feel it would be beneficial for Government’s to encourage population growth in areas outside of these regions to ease the strain on infrastructure which is already insufficient in the majority of these regions.
Related posts:
In this week’s blog we take a look at the trends in regional population growth analyzing the 25 fastest growing Local Government Areas (LGA) of the country based on the total increase in population.
Australia’s 25 fastest growing Local Government Areas
Source: rpdata.com, ABS
Victoria and Queensland each had eight LGA’s in the top 25. In Victoria all of the areas except for Greater Geelong where located within the Greater Melbourne metro area. All of the Melbourne LGA’s could be characterized as being on the outer fringes of the city and in locations which generally enjoy relatively affordable house prices. Of course greater Geelong, although being outside of Melbourne, is within commuting distance to the city and once more house prices in this region are relatively affordable compared to Inner Melbourne prices.In Queensland the LGA’s tend to be larger (especially after recent amalgamations) and Queensland LGA’s occupy four of the top five positions of fastest growing areas. Six of the eight Queensland LGA’s are located in the south-east corner of the state and the remaining two are the large regional cities in North Queensland (Townsville and Cairns).
New South Wales recorded five regions within the top 25 fastest growing LGA’s, all of which were situated within the Sydney metro area and most were situated in the outskirts of the City in areas which are relatively affordable. The exception was the Sydney LGA which is recording strong population growth thanks to inner city densification.
Western Australia had three LGA’s on the list all of which were located in the outer precincts and can be broadly described as providing more affordable housing than areas close to the city.
Finally in the Australian Capital Territory the Unincorporated ACT LGA, which covers most of the Territory, was the nation’s 13th fastest growing LGA during the period.
The clear trend is that populations are tending to grow the most in the outer more affordable regions of our major population centres. It’s not really surprising given that these major regions have the largest amount of land available for greenfield development, the strongest job prospects and most abundant amenity. In saying this, poor infrastructure provision in these areas often makes travelling around the city difficult and time consuming
We would expect these trends to continue however, we feel it would be beneficial for Government’s to encourage population growth in areas outside of these regions to ease the strain on infrastructure which is already insufficient in the majority of these regions.
Related posts:
Premium peril weighing down the market
Outside of Sydney the continuing weakness within the premium housing sector is hampering the broader market performance and resulting in value falls as witnessed in the latest RP Data-Rismark Home Value Index results.
The RP Data-Rismark suite of indices includes a stratified hedonic index which measures the performance of the major capital city markets across the most affordable 20% of suburbs, the middle 60% and the most expensive 20%. The index provides an important insight about the performance of different sectors of the market based on price. It also highlights that although the market may be showing an overall trend the results can be quite different amongst sectors and different capital cities.
Over the 12 months to March 2011 capital city home values have fallen by -0.6% in seasonally adjusted terms and by -0.5% in raw terms. Looking at the stratified hedonic index highlights that overall the market hasn’t necessarily been acting in concert.
The top 20% of suburbs have recorded a fall in value over the year of -3.3%. In contrast, values across the broad middle 60% of suburbs were virtually flat (-0.3%) as were the most affordable 20% of suburbs which were up 0.3% over the year. It is no doubt however, that all three sectors have recorded a marked slowdown in capital gains during recent months.
Within the major capital cities, the market performance over the year has actually been quite different. Across all of the capital cities, apart from Adelaide, the top 20% of suburbs have been the weakest performers. The premium market has been extremely weak within Brisbane (-8.2%) and Perth (-11.8%). On the other hand, the middle 60% of suburbs have been the best performers in Sydney and Brisbane and the most affordable 20% have been the strongest performed in Melbourne and Perth.
Over the last quarter, property values have fallen across all three market segments within the major capital cities. The greatest falls have once again been recorded across the most expensive 20% of suburbs (-2.0%) while the middle and most affordable suburbs have each recorded quarterly value falls of (-0.3%).
Sydney was the only city in which the premium end of the market did not record a fall over the quarter. Given that the top 20% of suburbs have recorded a fall of -1.2% over the year in Sydney, the 0.8% growth over the quarter may be an early sign of improving confidence in that sector. Across all other cities the most expensive suburbs have been the weakest over the quarter.
It is important to note that the top end weakness in Brisbane and Perth has been much more significant over the last quarter.
On an annual basis, values across the most expensive of Brisbane’s suburbs have fallen by -8.2% with a -4.5% fall recorded over the last quarter alone. In Perth, the top end has fallen by -11.8% over the year with a -8.4% fall in the last quarter alone. These results highlight the ongoing and growing weakness within the premium sectors of these two cities.
During the last quarter, the most affordable 20% of suburbs have been the best performed in each city outside of Sydney. In Melbourne (0.3%), Adelaide (0.0%) and Perth (0.1%) values have been either flat or shown some improvement. Given that value growth has stalled and is running well below inflation it may be an indication that values (at the lower end of the market at least) are becoming a little more attractive to purchasers. In saying this, don’t expect a rush of growth because rents are still generally more affordable than servicing a mortgage.
Over the coming months we anticipate that weakness in the premium sector is likely to persist however, falls are not expected to be as substantial as those in recent times. Overall we expect growth in property values to be minimal with some potential for slight falls. If any markets are going to show some signs of life we would expect them to be either the most affordable 20% of suburbs or the middle 60%.
The RP Data-Rismark suite of indices includes a stratified hedonic index which measures the performance of the major capital city markets across the most affordable 20% of suburbs, the middle 60% and the most expensive 20%. The index provides an important insight about the performance of different sectors of the market based on price. It also highlights that although the market may be showing an overall trend the results can be quite different amongst sectors and different capital cities.
Over the 12 months to March 2011 capital city home values have fallen by -0.6% in seasonally adjusted terms and by -0.5% in raw terms. Looking at the stratified hedonic index highlights that overall the market hasn’t necessarily been acting in concert.
The top 20% of suburbs have recorded a fall in value over the year of -3.3%. In contrast, values across the broad middle 60% of suburbs were virtually flat (-0.3%) as were the most affordable 20% of suburbs which were up 0.3% over the year. It is no doubt however, that all three sectors have recorded a marked slowdown in capital gains during recent months.
Within the major capital cities, the market performance over the year has actually been quite different. Across all of the capital cities, apart from Adelaide, the top 20% of suburbs have been the weakest performers. The premium market has been extremely weak within Brisbane (-8.2%) and Perth (-11.8%). On the other hand, the middle 60% of suburbs have been the best performers in Sydney and Brisbane and the most affordable 20% have been the strongest performed in Melbourne and Perth.
Over the last quarter, property values have fallen across all three market segments within the major capital cities. The greatest falls have once again been recorded across the most expensive 20% of suburbs (-2.0%) while the middle and most affordable suburbs have each recorded quarterly value falls of (-0.3%).
Sydney was the only city in which the premium end of the market did not record a fall over the quarter. Given that the top 20% of suburbs have recorded a fall of -1.2% over the year in Sydney, the 0.8% growth over the quarter may be an early sign of improving confidence in that sector. Across all other cities the most expensive suburbs have been the weakest over the quarter.
It is important to note that the top end weakness in Brisbane and Perth has been much more significant over the last quarter.
On an annual basis, values across the most expensive of Brisbane’s suburbs have fallen by -8.2% with a -4.5% fall recorded over the last quarter alone. In Perth, the top end has fallen by -11.8% over the year with a -8.4% fall in the last quarter alone. These results highlight the ongoing and growing weakness within the premium sectors of these two cities.
During the last quarter, the most affordable 20% of suburbs have been the best performed in each city outside of Sydney. In Melbourne (0.3%), Adelaide (0.0%) and Perth (0.1%) values have been either flat or shown some improvement. Given that value growth has stalled and is running well below inflation it may be an indication that values (at the lower end of the market at least) are becoming a little more attractive to purchasers. In saying this, don’t expect a rush of growth because rents are still generally more affordable than servicing a mortgage.
Over the coming months we anticipate that weakness in the premium sector is likely to persist however, falls are not expected to be as substantial as those in recent times. Overall we expect growth in property values to be minimal with some potential for slight falls. If any markets are going to show some signs of life we would expect them to be either the most affordable 20% of suburbs or the middle 60%.
Green Technology For Flooded Homes
FLOOD damaged districts of Brisbane and Ipswich should be rebuilt using resilient and sustainable building methods, said Green Cross Australia managing director Mara Bun. Ms Bun used the American town of Greensburg in Kansas as a reference point for Queensland Devastated by a tornado in 2007, it now has the mid-west's only Leadership in Energy and Environmental Design (LEED) Platinum accredited hospital, city hall and business hub, utilising advanced green technologies. "There is a lot of pressure to do things quickly [during recoveries]," she said. "Thinking 'business as usual' can lead to a short term focus on cost, but it is possible to have a broader view towards innovation and value for money." The company's Build It Back Green initiative was instrumental in working with communities following the Victoria bush fires of 2009. With clear thinking and motivation, a program focusing on small projects in affected areas like Ipswich, Grantham and Brisbane could come out of the recovery, said Ms Bun.Green Cross International was launched in 1993 by former Soviet statesman Mikhail Gorbachev and now has a global network of 30 offices plus an affiliate in America. Global Green USA is responsible for The Holy Cross Project located in the Lower 9th Ward of New Orleans, which features five homes and 18 apartment units. By logging on to Globalgreen.org, visitors can watch real time easurements of energy, electricity, gas and water consumption.Ms Bun said that it was proving to be a great tool for community education."It is not just in the aftermath of disasters that we can employ this," she said. "There is a big discussion on population growth [in Australia] given the predicted impacts of climate change, and predictions of further floods and storm serge."Over coming weeks and months, we will open dialogue with local government to discuss a vision that might be possible, and find areas where local appetite for this work is real."
» For more information, visit www.greencrossaustralia.org
Green Technology For Flooded Homes
FLOOD damaged districts of Brisbane and Ipswich should be rebuilt using resilient and
sustainable building methods, said Green Cross Australia managing director Mara Bun.
Ms Bun used the American town of Greensburg in Kansas as a reference point for
Queensland Devastated by a tornado in 2007, it now has the mid-west's only Leadership in
Energy and Environmental Design (LEED) Platinum accredited hospital, city hall and business
hub, utilising advanced green technologies. "There is a lot of pressure to do things
quickly [during recoveries]," she said. "Thinking 'business as usual' can lead to a short
term focus on cost, but it is possible to have a broader view towards innovation and value
for money." The company's Build It Back Green initiative was instrumental in working
with communities following the Victoria bush fires of 2009. With clear thinking and
motivation, a program focusing on small projects in affected areas like Ipswich, Grantham
and Brisbane could come out of the recovery, said Ms Bun.Green Cross International was
launched in 1993 by former Soviet statesman Mikhail Gorbachev and now has a global
network of 30 offices plus an affiliate in America. Global Green USA is responsible for
The Holy Cross Project located in the Lower 9th Ward of New Orleans, which features
five homes and 18 apartment units.By logging on to Globalgreen.org, visitors can watch
real time measurements of energy, electricity, gas and water consumption.Ms Bun
said that it was proving to be a great tool for community education."It is not just in the
aftermath of disasters that we can employ this," she said. "There is a big discussion on
population growth [in Australia] given the predicted impacts of climate change, and
predictions of further floods and storm serge."Over coming weeks and months, we will
open dialogue with local government to discuss a vision that might be possible,
and find areas where local appetite for this work is real."
sustainable building methods, said Green Cross Australia managing director Mara Bun.
Ms Bun used the American town of Greensburg in Kansas as a reference point for
Queensland Devastated by a tornado in 2007, it now has the mid-west's only Leadership in
Energy and Environmental Design (LEED) Platinum accredited hospital, city hall and business
hub, utilising advanced green technologies. "There is a lot of pressure to do things
quickly [during recoveries]," she said. "Thinking 'business as usual' can lead to a short
term focus on cost, but it is possible to have a broader view towards innovation and value
for money." The company's Build It Back Green initiative was instrumental in working
with communities following the Victoria bush fires of 2009. With clear thinking and
motivation, a program focusing on small projects in affected areas like Ipswich, Grantham
and Brisbane could come out of the recovery, said Ms Bun.Green Cross International was
launched in 1993 by former Soviet statesman Mikhail Gorbachev and now has a global
network of 30 offices plus an affiliate in America. Global Green USA is responsible for
The Holy Cross Project located in the Lower 9th Ward of New Orleans, which features
five homes and 18 apartment units.By logging on to Globalgreen.org, visitors can watch
real time measurements of energy, electricity, gas and water consumption.Ms Bun
said that it was proving to be a great tool for community education."It is not just in the
aftermath of disasters that we can employ this," she said. "There is a big discussion on
population growth [in Australia] given the predicted impacts of climate change, and
predictions of further floods and storm serge."Over coming weeks and months, we will
open dialogue with local government to discuss a vision that might be possible,
and find areas where local appetite for this work is real."
» For more information, visit www.greencrossaustralia.org
What is the ripple effect?
In short, the ripple effect is the way in which property booms begin in a central location and radiate outwards to influence surrounding areas, much like the almost hypnotic effect of concentric, ever increasing circles when you drop a pebble into the water.
According to the ripple effect, if prices rise in suburbs close to the CBD in the first instance, the ripple effect will soon see them spread to the middle suburbs and later on to outskirt areas and suburban jungles.
The ripple effect is such because buyers who are priced out of the booming area try to get as close to the action as they can, and therefore settle for lower cost properties close to the action, but not at the core of the boom.
These areas then start to gain popularity, and demand pushes prices upwards as they turn into the "next best" areas.
These areas then start to gain popularity, and demand pushes prices upwards as they turn into the "next best" areas.
Benefits of the ripple effect
The ripple effect can be the chance for investors who missed out on the initial boom area to grab their slice of the pie -- investing in areas close to the prime area that has surged in price, but without paying exorbitant boom prices which often won't be recovered through cash flow or capital gain for some time.
In most major cities the ripple effect has already played out, and investors will find prices are already pretty high in the outlying areas surrounding the inner prime location.
But one way to find a ripple effect opportunity is to look for suburbs that have underperformed in 5-year growth averages that are located in close proximity to areas with high growth rates for the same period.
In most major cities the ripple effect has already played out, and investors will find prices are already pretty high in the outlying areas surrounding the inner prime location.
But one way to find a ripple effect opportunity is to look for suburbs that have underperformed in 5-year growth averages that are located in close proximity to areas with high growth rates for the same period.
Eventually, these under-performing areas will experience a catch-up -- and there could be some very good bargains worth picking up.
Finding the right suburb to invest in - using the idea of the ripple effect
As always, property investors will need to do their research. If you can find suburbs near the cbd that have underperformed compared to other comparable suburbs then you are on the right track. Once you have identified the suburb, then the search for a suitable property could begin.
Downsize and Enjoy Life
Brian and Trish Allen describe themselves as "empty nesters".
They moved from Victoria to Queensland around six years ago to be closer to their children and grandchildren and after that their large family home developed into something resembling "Paddington Station".
Several family members moved in and out as all that extra space afforded by the larger home was utilized whenever it was needed. But it wasn't long until that need died down.
And eventually the couple found themselves alone in a four bedroom house with a study, pool and basketball court, along with all the work to maintain the property. It was then they started looking at downsizing. We already lived in a townhouse in Melbourne, so to downsize wasn't a big emotional issue,
We decided to do it now because we've started travelling a bit more with the caravan and friends, and by not having as much work to do around the property it freed our weekends up to give us more leisure time." After a month of searching the couple settled on a new townhouse.
Brian said he was looking forward to not maintaining their yard. He suggested couples looking to downsize set out exactly what they're looking for early on, and start their search from there.
The first thing you need to do it sit down and look at what you've got, and what you really need,"
'We had too much of things we didn't need and didn't use. We didn't use two-thirds of the house.
Therefore we started looking at what were the essential things, a checklist of the 10 most essential things, that we want from a home and that ticked all the boxes.
Buyers are research savvy
ASK any real estate professional and the majority will agree that buyers are more educated, and undertake more research during their buying quest, than ever before.
It is always imperative that buyers do their research, but even more so in the current economic climate given the tighter lending criteria currently in place.
Having an understanding of your borrowing power before signing a contract of sale ensures both parties can proceed with confidence.
Indeed, REIQ research has found buyers are taking their time during their property search and also inspecting more
properties.
And these results, from research conducted late last year, are likely to be even more pronounced given the presently subdued market conditions.
The research found on average, buyers take about 11 weeks to find the residential property of their choice. Across Queensland, 23 per cent of buyers take less than one month; 20 per cent of buyers between one and two months; while 33 per cent say their search extended beyond four months - that's a lot of Saturdays.
And typically the longer the search period for a property, the higher the value of the property being sought.
Over the past decade, technology has intermingled with our business and personal lives like never before.
Buyers of all kinds now often head online during their search and nowhere has this been more obvious than in their perpetual search for real estate.
Across the state, the REIQ research found that 40 per cent of buyers physically inspect five or less properties during their search, which is possibly a reflection of the amount of information that is now available about listings prior to inspections or attending open homes.
The average number of properties physically inspected before purchase was
about nine, but most commonly buyers are inspecting between six and 10 (28 per cent) or between two and five (23 per cent). Seventeen per cent of buyers are inspecting more than 20 properties.
But one thing that hasn't changed over the years is the importance to buyers of seeing the price and address of a property shown in an ad for a private treaty sale.
In the research, 96 per cent of buyers say that seeing a purchase price in an ad is important; while 94 per cent say that seeing the property address is important. These are consistent with the findings of similar REIQ research in 2003.
REIQ chairman Pamela Bennett
Happy House Hunting Cheers Robert About-face riles residents
- Local News
BRISBANE City Council has scrapped a promised upgrade to Riverside Park, leaving flood-affected residents to battle dust, debris and hooning issues on the reopened Riverside Drive.
The Gabba Ward councillor Helen Abrahams supported the call from residents to close Riverside Drive in 2010.
Cr Abrahams initially questioned Council’s move to reopen the road, after approval to replace it with a designated bikeway and pedestrian pathway along the river bank, and is now wondering where more than $700,000 collected from developers to fund the upgrade has gone.
``Council received $769,472 as parkland contributions from developments along the river in West End,’’ Cr Abrahams said. ``What’s happening to that money?’‘
``The repairs undertaken on Riverside Park should be consistent and done with the same level of urgency as all the other flood-damaged parks in Brisbane.’‘
FLOW Apartments resident and body corporate representative Leanne Sturgess said several body corporate groups had banded together to lobby for permanent closure of Riverside Drive.
``The road has a terrible hooning problem, not to mention the dust and debris being blown into our homes at the moment with the reopening of the road,’’ Ms Sturgess said.
Lord Mayor Campbell Newman said it was ``with a heavy heart’’ that he announced the cuts.
West End Community Association president Darren Godwell said he was disappointed to see the upgrade scrapped.
``We need to find more green and open spaces,’’ Mr Godwell said.
The Gabba Ward councillor Helen Abrahams supported the call from residents to close Riverside Drive in 2010.
Cr Abrahams initially questioned Council’s move to reopen the road, after approval to replace it with a designated bikeway and pedestrian pathway along the river bank, and is now wondering where more than $700,000 collected from developers to fund the upgrade has gone.
``Council received $769,472 as parkland contributions from developments along the river in West End,’’ Cr Abrahams said. ``What’s happening to that money?’‘
``The repairs undertaken on Riverside Park should be consistent and done with the same level of urgency as all the other flood-damaged parks in Brisbane.’‘
FLOW Apartments resident and body corporate representative Leanne Sturgess said several body corporate groups had banded together to lobby for permanent closure of Riverside Drive.
``The road has a terrible hooning problem, not to mention the dust and debris being blown into our homes at the moment with the reopening of the road,’’ Ms Sturgess said.
Lord Mayor Campbell Newman said it was ``with a heavy heart’’ that he announced the cuts.
West End Community Association president Darren Godwell said he was disappointed to see the upgrade scrapped.
``We need to find more green and open spaces,’’ Mr Godwell said.
Capital Growth: How to Predict the Next Property “Hot Spot”
| One of the more essential elements when it comes to property investing is location. It is often said that the right location is one of the foremost issues when choosing where to buy. |
| Capital growth is the ideal result for any property investor; it provides increased equity for future investments or a simple profit on your investment. Monique Wakelin from Wakelin Property Advisory illustrates that capital growth can build substantial net equity quickly and allow investors to build up profit. "While it makes sense to aim for a reasonable balance between growth and income to allow you to meet your loan repayments, insurances and other holding costs, your bias should always be in favour of growth because this is the most direct route to financial independence." Ms. Wakelin explained. As many professional in the property market explain, smart investing means recognizing current and future ‘hot spots’ and knowing where to invest. Property cycles are rotating across all suburbs, with many in different stages. Capital gains are not generally a quick occurrence but build momentum over time through these cycles. There are several approaches when choosing an investment property with property professionals naming numerous elements that must be considered if one is aiming to profit off capital growth. Scott McGeever, director of Property Searchers, says he recommends investors own a property for more than 10 years in order to maximise their capital gain. "We advise all our clients you really need to be holding a property for a minimum of five years," he says. While length of ownership is important, so is choosing the right area. Capital growth potential should be researched to find out the key elements of the suburb the investor wishes to buy in, thereby indicating its chances for capital growth. Bernard Salt, KPMG partner and demographer, says that there are two key demographic factors currently affecting capital growth: infrastructure and job growth. "Places that have recently been subjected to infrastructure changes will change the value of a suburb. Although, there are always two phases to price growth associated with infrastructure changes. There is an initial boost when construction begins, and then another boost when the project is completed.” Mr. Salt explained. "Once it's actually completed and people can actually see and feel it, which is when the mass market makes its move. And that's when I think the most significant gains are made. Job growth is less definitive although there is a formula that can be applied: job growth begets population growth which begets property value growth." The cycle for job growth relating to population growth is predicting at two years with another year for property growth. Salt explained job increases attract a growth in population and competition for properties, which in turn, builds property values. John Edwards, chief executive of Residex and property analyst, says that buying property depends on when you enter the property cycle. "At this point in time, what you should be doing is looking for those areas that have reached the bottom of their correction cycle" he says. Whereas fellow property analyst Michael Matusik, of Matusik Property Insights, says that there are key factors that influence strong price growth in any particular suburb and will always predict if capital growth is approaching. He says it is all a matter of looking at price growth, the average sale and rental prices, population growth, and employment rates. Mr. Matusik suggests a simple equation for calculating the potential of an area. “Calculate the distance from GPO or major regional business centre, proximity to education, health and retail facilities, access to public transport, especially rail and if it is within five minutes drive of major open space.” |
Joint Flood Task Report
"With the new defined flood level being quantified, the Brisbane property market will change forever. But how will this impact the development sites on the river that were previously plotted for medium density, and mixed-use development? The Lord Mayor Campbell Newman has released the Joint Flood Task Report and recommends that new homes in the flood-affected areas will have to be built 800mm to 2m higher to prevent a repeat of the disaster. This will impact the way buildings interact with streetscapes and change the dynamics of basement design through the city in flood prone and flood affected areas. The Ellivo Architects team have been working with government bodies, medium density developers and property owners throughout Brisbane to rework development designs quickly, and keep projects progressing through Development Approvals. From a design perspective, lower floors of buildings can be designed with hose out foyers, visitor parking and other low risk spaces, whilst raising services and switchboards above the new defined flood levels. Bund levels can be reassessed or basements avoided in favour of sensitively treated podium level parking. Now the new defined flood levels are being quantified, new designs must give certainity to developers, financiers, the buying public and the broader community that these new developments will withstand similar acts of nature in the future. That some of these affected sites are in high growth, undersupplied areas places further urgency on the timely delivery of this product. It may be prudent to question the maximum height for developments in these areas to encourage a modern form of “high set” design. This would need to be achieved in a way that is sympathetic to the street. We cannot afford to allow these valuable yet difficult areas to be “no development zones” but must work with the unpredictability of the river, designing and legislating accordingly."
Don't believe the reports on Australian house values
By James Kirby March 6, 2011 Sydney Morning Herald
ARE they all wrong? The IMF, the OECD and now, ladies and gentlemen, those anonymous analysts at The Economist who have branded Australia ''the most overvalued housing market in the world''?
It's quite a call - our house prices are more overvalued than anywhere you'd like to name - Shanghai, Sweden or Switzerland. According to The Economist Australia's home prices are 56.4 per cent overvalued. And that's comfortably above the second-highest figure of 53.7 per cent in Hong Kong.
We stand in contrast to the US where the top 10 cities are approaching fair value at 3.7 per cent overvalued, and in wild contrast to Japan, which has been going nowhere since the early 1990s and is now estimated at 35 per cent undervalued.
These reports - and they are now as regular as Charlie Sheen meltdowns - understandably spook us in a land where the bulk of family wealth is in the home. And if it is beyond dispute that Melbourne and Sydney homes cost more than Hong Kong homes, then we are in a bubble.
But hold it one second … what exactly did The Economist measure? The ratio of home prices to rents in 20 economies. It's a single measure - and a leaky one at that.
You could simply say Australia tops The Economist list because our average rents are too low - rental yields have remained unchanged at about 4 per cent for many years, though they are beginning to rise.
More likely our home values are justified by one of the best economies in the developed world - even if it is a two-speed model in which mining industries thrive and other sectors struggle. And that's before you factor in the exceptional tax shelter encased in the family home along with the concentration of our populations in four cities.
What's more, the factors that could start to immediately move prices - higher or lower - are dormant. Investors as a proportion of the market have remained unchanged since the GFC while the housing shortage remains virtually static.
Paul Braddick, head of property research at ANZ, points to lower home approvals. In trend terms, home building approvals have been falling for nearly a year, although it has to be said the most recent statistics on home building approvals have been skewered by the Queensland floods crisis. Indeed, the floods highlight the problem with housing statistics. The statistics are riddled with localised exceptions.
When you start comparing international house prices, the problems are enormous.
Back in the domestic market, the median dwelling price in Australia today is about $412,000, which is useful to almost nobody. If you are looking for a home in Sydney's harbour suburbs the average price belongs to another planet; if you want a house in rural Victoria the same holds true.
It's clear the factors driving the housing market have been stalled by successive interest rate rises.
But there are few signs that prices are now going to plunge.
It is much more probable that they will drift for at least a year after slipping by an estimated 1 per cent in the 12 months to January. And this is not a bad outcome for most homeowners whatever this report or the next report might care to say.
It's quite a call - our house prices are more overvalued than anywhere you'd like to name - Shanghai, Sweden or Switzerland. According to The Economist Australia's home prices are 56.4 per cent overvalued. And that's comfortably above the second-highest figure of 53.7 per cent in Hong Kong.
We stand in contrast to the US where the top 10 cities are approaching fair value at 3.7 per cent overvalued, and in wild contrast to Japan, which has been going nowhere since the early 1990s and is now estimated at 35 per cent undervalued.
These reports - and they are now as regular as Charlie Sheen meltdowns - understandably spook us in a land where the bulk of family wealth is in the home. And if it is beyond dispute that Melbourne and Sydney homes cost more than Hong Kong homes, then we are in a bubble.
But hold it one second … what exactly did The Economist measure? The ratio of home prices to rents in 20 economies. It's a single measure - and a leaky one at that.
You could simply say Australia tops The Economist list because our average rents are too low - rental yields have remained unchanged at about 4 per cent for many years, though they are beginning to rise.
More likely our home values are justified by one of the best economies in the developed world - even if it is a two-speed model in which mining industries thrive and other sectors struggle. And that's before you factor in the exceptional tax shelter encased in the family home along with the concentration of our populations in four cities.
What's more, the factors that could start to immediately move prices - higher or lower - are dormant. Investors as a proportion of the market have remained unchanged since the GFC while the housing shortage remains virtually static.
Paul Braddick, head of property research at ANZ, points to lower home approvals. In trend terms, home building approvals have been falling for nearly a year, although it has to be said the most recent statistics on home building approvals have been skewered by the Queensland floods crisis. Indeed, the floods highlight the problem with housing statistics. The statistics are riddled with localised exceptions.
When you start comparing international house prices, the problems are enormous.
Back in the domestic market, the median dwelling price in Australia today is about $412,000, which is useful to almost nobody. If you are looking for a home in Sydney's harbour suburbs the average price belongs to another planet; if you want a house in rural Victoria the same holds true.
It's clear the factors driving the housing market have been stalled by successive interest rate rises.
But there are few signs that prices are now going to plunge.
It is much more probable that they will drift for at least a year after slipping by an estimated 1 per cent in the 12 months to January. And this is not a bad outcome for most homeowners whatever this report or the next report might care to say.
THE CASH RATE REMAINS 4.75%.
At its meeting held today, the Reserve Bank of Australia (RBA) Board decided to maintain the official interest rate at 4.75%.
Key Factors
The following sentences taken from the RBA's media release provide the key reasons for today's decision:
Key Factors
The following sentences taken from the RBA's media release provide the key reasons for today's decision:
· The global economy is continuing its expansion, led by very strong growth in the Asian region.
· Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly and Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices.
· In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income.
· Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend
· The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment and reports of skills shortages remain confined, at this point, to the resources and related sectors.
· Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008 and production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year.
The chart shows the movement of the official interest rates over the past decade.
Commentary
Overall the Board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook. This view is highly consistent with consensus view of market economists.
Outlook
In the February Interest Rate Knowledge Update, no interest rate increases were considered likely over the next few months while by mid-year and into the first half of 2012 the economic landscape is expected to change. At present this remains the view. In fact, the impacts of the big wet and cyclone Yasi has reinforced this view to the point where the author of this piece is prepared to walk naked through Queens Street Mall if there is a rate rise announced in March. Let's hope for the benefit of all that there is no preemptive strike against inflation is announced in a month's time.
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