The right property, at the right price, everytime!

CALL NOW: 1300 655 615

April 2010 - What's Driving Property Prices?

Welcome to your April edition of propertybuyer’s
market update. In this edition we will look at…
1. What’s Driving Property Prices?
2. Client Stories
3. Population breaks the 22m mark!
4. Hot properties
5. Inspiration Corner - Thoughts of the Month

1. What's Driving Property Prices - By Rich Harvey
Earlier this month, the Reserve Bank Governor Glenn Stevens made some interesting statements warning people about speculating on property during a personal interview on Channel 7’s sunrise program with David Koch:
"I think it is a mistake to assume that a riskless, easy, guaranteed way to prosperity is just to be leveraged up into property; it isn't going to be that easy," he said. "If you look back when the economy was stable and we had low inflation, the cash rate has been an average of 5 per cent," he said, referring to a period since the 1990s.
Its interesting to see how the Reserve bank is using the media as an opportunistic mouthpiece – in finance circles the RBA is using what is termed “Open Mouth Operations” (ie the power of the media) instead of their more traditional Open Market Operations to help influence the direction of monetary policy and the rising property market.
I entirely agree with the Governors comments. Many first time investors get caught up in the excitement of doing their first deal and lose sight of both the details and the big picture. You can’t just go out and buy any property and expect to make a huge return. There are dud investment properties out there even in our prime markets of Bondi, Vaucluse, Mosman and Manly. Investing just in the boom times does not guarantee you success. It takes considerable research, local knowledge; smart negotiation tactics and persistence to find properties that out perform the average.
So let’s have a brief look at what is driving the Australian property market. Our economy is growing strongly and recovering well from the downturn during the GFC (predictions point to 3.5% GDP growth this year). Strong commodity prices are assisting our export earnings, inflation is within the target range and unemployment is falling. These conditions and our solid banking system make us unique by world standards.
The major buying groups currently driving the market are upgraders and investors. Consumer confidence has returned, employment markerts are growing and people are more confident to make property buying decisions. With rising rents and stronger capital growth on the horizon, investors are looking to put their money to work in property investment while home buyers with improved equity are seeking to upgrade their homes.
Expats are also making a major impression on the market. We have seen a significant rise in the number of inquiries from expats and are currently assisting buyers from the UK, South Africa, Singapore, Hong Kong and the US. Many Aussie expats are watching our property market with interest and realising the undersupply situation will push prices higher.
Foreign investors are becoming a major force in the property market with the majority coming from Asian nations. We have assisted many clients from Malaysia, Japan and China in recent months looking for investment and new homes. With the relaxation of the Foreign Investment Review Board (FIRB) requirements, foreign buyers are cashing in on Australian property as a safe haven and some larger developers are land banking sites for future development.
Baby boomers with self managed super funds that have been hit with poor returns from the GFC are looking for alternative investments in property for less volatile returns. There are over 400,000 self managed super funds and this figure is growing daily. Investors can leverage into residential property using instalment warrants to purchase investments. This type of investment tends to be done by boomers aged over 45 with at least $100k in their current fund.
First home buyers are minority force in todays market compared to last year when the generous government grants were stimulating the lower end of the market.
According to property experts Residex, house prices for each Australian capital city has risen strongly since March 2009: Melbourne 17.7%, Sydney 13.5%, Adelaide 7.6%, Brisbane 4.9%, Darwin 10.1%, Perth 5.2% and Hobart 4.0%. Its also a similar story for units.
Interest rates are the big cloud on the horizon that will dampen demand and influence property price growth. The Melbourne market has performed very strongly in the last year and is likely to see some slowing in the next 12 months. Sydney on the other hand has had a sluggish performance with percentage growth over the past 5 years but is likely to see solid growth over the next few years. There is still a lot of confidence left in the property market and it will take several rate rises to see the effect of a dampening on demand over the coming 6 months. Most economists predict we will see the cash rate return to around 4.75% to 5.0% by December.
While I’ve briefly covered some of the main “groups” of buyers in the current market, one of the biggest drivers of property prices is population growth and migration. The article below looks at how Australia’s population has swelled to 22 million and is expected to grow to over 37 million by 2050. We are currently not building enough properties to house our population which means excess demand, serious lack of supply and hence rising house prices and rents.
To identify properties that will outperform the average, please call our team us to discuss engaging our services and assist you in finding your next home or investment property. Please call +61 2 9975 3311 for an obligation free chat or Click here to send us your Wishlist
This article was written by Rich Harvey, founder and CEO of propertybuyer ®, Sydney & Australia’s leading Buyers Agents. Rich is an economist and was awarded the 2009 National “Buyers Agent Award for Excellence” by the Real Estate Institute of Australia and the 2007 National Telstra Business Award (amongst other awards).
2. Client Stories
(i) Fully reno’d at a cheaper price!!
Buyer type: Investor (budget $850,000)
Buyers brief: Investment property in blue-chip area with strong rental yield
List price: Auction $700,000+ (appraised $770,000)
Purchase price: $748,000 (un-renovated unit in the same complex sold for $780,000) Saving: $22,000+
Buyers’ agent comment: Matt Corbett
Ian and Melinda were looking for an investment property in the lower north shore area with solid capital growth and rental yield around 4.5%. After discussions we also stretched the target area to Manly, which traditionally represented higher capital growth. Within 2 weeks I found a fully renovated 2 bedroom apartment in one of the finest streets in Manly. It was listed to go to auction and I knew the agent was low on their price guide and quickly secured it prior to auction. In this case I was extremely confident that we would have had to buyers agent for real estatepay more on auction day, which was supported a couple of weeks later by an un-renovated apartment in the same building achieving $780,000 at auction.
What our clients say:
“Matt was of great help to us in buying our recent investment property. He had very helpful insights into the location in which we were interested and quickly came to grips with our requirements. In the final stages of negotiations with the selling agent, Matt's knowledge of agents and processes and his capacity to act objectively, and yet push hard, were invaluable in ultimately securing the property for us.”
Ian (Minister)
************************
(ii) Busy professional secures dream home
Buyer Type: Home buyer (Budget $2.5m+)
Buyer’s Brief: Secure, warehouse-style home in high growth area within easy reach of the city CBD and fringe
List Price: $2.35m - $2.4mbuyers advocate
Purchase price: $2.32m
Saving: $30k - $80k
Timeframe: 21 days
Our client, had a highly specific brief and was looking for an Open plan home with an interesting but functional layout. They were looking for a home that had character and, to them, felt “hip and young”. The client and her family were extremely busy and travelled regularly, making direct contact and availability for inspections limited. We started with both a broad reaching suburb and price range and through regular feedback and discussion, we quickly narrowed our search range to a more targeted area with a specific budget range in mind. Within a short space of time we had identified two potential properties and quickly appraised these on our client’s behalf. It was clear that either property would suit our client and it was a matter of further discussion, reflection and implementation of an appropriate negotiation strategy to secure the chosen property. After making an initial offer the vendor counter offered at a price higher than the asking price!! Despite some apparent difficulties with the agent’s management of vendor price expectation, we managed the process and adjusted our strategy in order to reach a successful purchase for our client.
What our client says:
“Having an extremely busy schedule and no time to dedicate to monitoring the market and attend inspections, I quickly realised the value of engaging the services of a professional Buyers Agent.
propertybuyer demonstrated great patience, objectivity and an intimate knowledge of both agency and sales process, which reassured me I would get the best possible outcome. They dedicated their time and energy and leveraged their contacts in the market to shortlist the most suitable properties. As I travel a lot with work it was great to have someone manage the whole process and achieve a great result in such a short space of time. In the end it removed a lot of stress, sped up the process and I got my dream home.” F.P.
************************
Investment property sydney
(iii) Investor saves a packet
Buyer type: Investor
Buyers brief: Eastern Suburbs
List price: $825,000
Purchase price: $785,000
Saving: $40,000
Buyers’ agent comment - David McElveney
The brief was to buy a well positioned property in the ultra competitive Eastern Suburbs property market. We managed to find a property that was not only well positioned but also with 180 degree views of Sydney's skyline to the CBD and Harbour Bridge. Not only that but we bought for the same price on the same floor of the same building 1 year ago. Considering the market has risen by 13% in that time you might say the client saved around $100,000.
What our clients say:
“Working with David made the process of entering the Sydney property market an exciting proposition as opposed to a nerve wracking one. His expertise and experience was complemented by a professional manner that made our working relationship one that encouraged open dialogue and the free exchange of opinions. The end result was buying a property I am very happy with at a time when the market was quite daunting. David will be the first person I call when I’m ready to buy again.”
Mark
If you are considering buying and would like to get the upper hand with a professional buyers’ advocate representing just you (not the vendor), sourcing and negotiating the best opportunities throughout Sydney and Australia, then please call our team on +61 2 9975 3311 for an obligation free chat OR Click here to send us your Wishlist.
3. Population Breaks the 22 Million Mark!
During the September quarter Australia’s residential population broke the 22 million mark. Fuelled by one of the highest population growth rates in the Western world, the number of Australian permanent residents was estimated to be 22,065,671 persons; 451,876 more than at the same time last year.
property investment australia
Population growth is an important indicator for the property market. At the macro scale, population growth is a default measure of housing demand. Put simply, more residents equate to a larger requirement for housing. The ongoing high rate of population growth is half of the reason why Australia has an ongoing shortage of housing.
Based on the average household size of 2.6 persons, the latest population growth figure equates to a requirement for around 173,800 new homes over the year to September 2009; a target that the building sector is falling well short of. The latest dwelling commencements data shows that as a nation, over year to September, we have only commenced construction on 129,400 new dwellings – about one third lower than what is needed.
In fact, the undersupply is actually worse than that. Factoring demolitions and second homes into the equation adds a further 23% to the equation (in a speech last year by Deputy Reserve Bank Governor Ric Battellino estimated that 15% of new dwellings constructed are to replace existing homes and a further 8 percent are likely to be second homes – refer to the ‘Are we building enough dwellings’ section of his speech here: http://www.rba.gov.au/speeches/2009/sp-dg-251109.html).
The primary driver of population growth in Australia remains overseas migration which accounts for about 65% of the nation’s overall growth. The remaining component of population growth is the natural increase (births minus deaths). Despite the number of overseas settler arrivals trending downwards last year, net overseas migration to the country remains exceptionally high. This is largely due to fewer long term residents deciding to leave Australia thanks to our comparatively healthy economic conditions. The number of long term resident departures has been trending downwards since peaking in March 2008, which has more than offset the lower number of new overseas settler arrivals.
investment property agent
On a regional basis, the Eastern Seaboard states continue to record the highest number of new residents. Victoria, New South Wales and Queensland account for 78% of Australia’s overall population growth over the year to September 2009.
Investment property sydney
In September there was a changing of the guards, with Victoria taking the lead as the state with the highest level of population growth over the 12 month period. Since the ABS records began for this series of population growth (1981), this is the first time that Victoria has outgrown Queensland and New South Wales (even though it is by the barest of margins – Victoria’s population grew by just 0.8% more than New South Wales over the year).
investment property buyers agents
Looking at the speed of population growth, it is Western Australia where the population is growing the fastest. Over the year the population of Western Australia increased by 2.9 percent – well above the national average of 2.1%.
There are opportunities and challenges that become apparent with a consistently high rate of population growth. From a positive sense, population growth creates economic stimulus. More people means more demand for Australian goods and services. Also, with an ageing population and baby boomers moving into retirement, population growth provides more tax payers rather than higher taxes amongst a smaller pool of working Australians.
The real challenge, however, is ensuring Government policy is aligned with population growth. That means ensuring a strategic population growth strategy is in place, major infrastructure developments and upgrades run in parallel with population increases and enough strategically located and developable land is released to accommodate our growing cities.
(Article supplied by RP Data 2010)
4. HOT PROPERTIES
DEVELOPER CLEARANCE SALE- Exclusive to Propertybuyer –
(you will not find this on realestate.com.au)
As you are no doubt aware we are constantly inundated with “opportunities”.
Fewer than 1% of these “opportunities” make it past our due diligence process. We have found a true opportunity where we have measured the upside and removed the downside.
Imagine an inbuilt capital gain of between 12 and 15% over the next 12 months with a capital guarantee.
Please read below the key points and register your interest by clicking on the email link below.
As you know, we do not sell properties; however there are times when a property is just too good not to pass on with our emphatic endorsement.
  • Final 4 properties available in stage one of a boutique estate of 33 lots in coastal QLD.
  • Rents are predicted to return a yield of between 5.5% to 6%.
  • This offer is only available until May 21
  • Prices for stage 2 will be increased by 5% as per instructions thus locking in profits for stage 1 purchasers
Many of our clients have profited from off-plan purchases and know this is the best time for a savvy property investor to buy.
Prices reduced as follows:
4 bedroom home central to the local shopping precinct on 783 m2 reduced from $470,000 to $439,500. Saving $30,500
qld buyers agent
Elevated home with district views reduced from $479,000 to $445,000
Saving $34,000
Spacious home with ocean glimpses on 852m2 reduced from $496,800 to $465,000
Saving $31,800
Luxury home with 180 degree sweeping ocean views reduced from $685,000 to $621,000
Saving $61,000
Capital guaranteed
Guaranteed buyback at cost plus 5% after 12 months from the developer.
5. INSPIRATION CORNER
If you do what you’ve always done, you’ll get what you’ve always got.” Tony Robbins
“The best ways to get something done is to begin.” Anonymous
People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily” Zig Ziglar.
I hope you enjoyed your April update and we look forward to keeping you informed in the next edition.
If you would like to buy a property and have a professional buyers advocate on your side sourcing and negotiating the best opportunities throughout Sydney and Australia then please call +61 2 9975 3311 or email us to find the easier way to buy property.
Click here to send us your Wishlist.
Warm regards
Rich Harvey
Managing Director
Tel: +61 2 9975 3311
PS…. PLEASE SEND TO A FRIEND
Your subscription to propertybuyer’s monthly market updates are absolutely FREE! As a return favour, please send this newsletter to someone you know that would also benefit from the information. Most of our business comes via word of mouth so I’d really appreciate your help to get the word out! Please Forward this email to a friend and suggest they subscribe.
Many thanks, Rich