The State of Play

Amid gloomy economic conditions globally and a generally subdued housing market, First National Real Estate believes encouraging signs have emerged in the Australian housing market.

The September Westpac Melbourne Institute Index of Consumer Sentiment is now at its highest level in two years. The survey that tracks responses on ‘whether now is a good time to buy a dwelling’ jumped a healthy 15.1% in September, following a gain of 8.1% from August to September.

Anxious households clearly drew comfort from the concrete evidence of an improved outlook for interest rates when major banks lowered fixed-rate mortgage rates in August. Strong recovery in economic growth in the June quarter attracted wide media coverage and this is likely to have also boosted spirits.

First Home Buyers expected to make a return

FHBs are expected to re-appear towards the end of this year, led by buyers in NSW trying to beat the December 31 deadline for the end of Stamp Duty concessions. One mortgage originator says loan enquiries from FHBs are up 15% nationwide and 30% in NSW last month, on the back of interest rate stability for the past 10 months.

Buyers market? Yes, no, maybe…

Buyers’ agents nationwide report a property market ripe for the picking. However, that’s not consistently true.

In Sydney, good value remains as elusive as always while in Melbourne, investors have the run of the market.

A fundamental supply shortage exists in key areas of Sydney and this is exerting underlying pressure on prices. However, properties that would previously have attracted five to eight bidders are today attracting less than four. Still, First National’s auction clearance rate has lifted in recent weeks, according to Corporate Auctioneer, Michael McCaffery.

Melbourne’s lackluster performance is allowing investors to pick the eyes out of the market. Three and four bedroom houses in Flemington, Carlton North and other inner suburbs are showing very good value. One bedroom apartments in Coburg, Clifton Hill and West Brunswick are, in some cases, $50,000 cheaper than they were last year.

South Australia is particularly price sensitive after a 12 year Bull Run has come to an abrupt end. Properties in the $500,000 to $1,200,000 are considered to have the potential to fall between 10% and 15% from the boom values of October 2010, but owners are holding despite considerable ‘mortgage stress’.

Perth has yet to reach the bottom of its adjustment and recovery is anticipated in 2012. There are between 16,000 and 17,000 properties on the market, well over the equilibrium figure of 13,000. Long-term strong performing suburbs like Leederville and Subiaco may see a 5% to 10% correction. Opportunities are tipped in suburbs a kilometer from Perth’s CBD where re-zoning is about to unlock re-development opportunities. Suburbs such as Padbury, Craigie, Heathridge, Joondalup and Greenwood offer good value buying and renting.

Tasmanian prices have fallen, but only in the media, and the REIT has taken the Hobart Mercury to task over the publication of out of date ‘mainland’ data, and, the Southern Cross TV network over predictions of a return to 2001 values. Institute figures show a 7% rise in the median price over the past 2 years and, in recent weeks, an increase in the number of sales and quality properties being listed. With one in seven property purchases being made by mainland or overseas buyers, demonstrable interest remains in Tasmanian property investment.

The Westpac-Melbourne Institute is indicating highly favourable buying conditions in Queensland – prices in key investment areas have fallen 7% to 10% on last year’s prices. Predictions of a 35% fall in the values of Brisbane properties haven’t materialised but there are 18% more properties on the market than in the same quarter last year. The biggest drop in values has been seen in outer Brisbane suburbs such as Caboolture, Ipswich and Beenleigh – 15%. The Gold Coast has suffered more than other areas and is being targeted by bargain hunters. ABS figures show a rise of 16% in financing of investment dwellings for the June quarter, but active buyers are still well below long-term averages in Queensland.