Market Updates
January 2011: Market Predictions, Prestige Volatility and Creating the Ideal Portfolio
Happy New Year and welcome to your January propertybuyer market update. In this edition we will look at…
Market predictions for 2011
Prestige market ripe for picking
Creating the ideal investment portfolio – Seminar 24th Feb
Inspiration Corner - Thoughts of the Month
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1. MARKET PREDICTIONS FOR 2011. BY RICH HARVEY
Welcome to the New Year. We hope all our subscribers enjoyed a relaxing break over the Christmas period. Here’s my outlook for the year ahead.The property market slowed considerably in the last quarter of 2010 and is likely to show subdued activity for the first six months of the New Year. RP Data Rismark noted a slight decline of -0.2% in house prices of capital cities in November and expects very modest (4% to 6%) to nil capital growth over 2011 depending on the number of projected interest rate rises. I believe this means we are likely to see a window of opportunity over the next six months for buyers to capitalise on negative sentiment.
The period from Feb to May in 2010 saw a very active property market with competitive bidding and offers from buyers. But by mid year, the market cooled quickly and a surge of listings diluted the prices that were achieved earlier in the year. The supply demand balance had swung back in favour of the buyers. Vendors will need to face a reality check in order to affect a positive sale in the coming months.
The impact of the floods will play an interesting role in the state of the property market..… a negative supply shock for some goods will see prices spike for fruit, meat, coal and rental housing. Demand for qualified tradespeople will also increase. The distressing scenes of flood affected areas have invoked a strong community spirit with thousands of volunteers stepping up to lend a hand in the massive clean up effort. Our hearts and prayers go out to those affected.
Finance requirements from banks are still tight and lending policies are not likely to be relaxed much this coming year. Developers are finding it harder than ever to get finance for new construction due to pre-sale requirements - in some cases they require up to 80% pre-sales to secure bank funding.
Interest rates: We are likely to see 0.5% increase in the cash rate this calendar year. With flood devastation having a ripple effect through economy, prices for many goods will increase adding inflationary pressure. Higher rates will sort out serious buyers from those “just looking”. Higher interest rates will also have a “tipping point” effect on the market – ie, the point at which there is extreme negative consumer sentiment which sees the market grind to a halt.
First home buyers – likely to see a further drop off in interest as affordability becomes tougher for those just getting into the market. The reduction in government grants also dampened demand. Upgraders and second home buyers – likely to see some trading up effect as downsizers seek smaller homes and expanding families with young search for the dream backyard.
Investors – 2011 presents an excellent opportunity to take advantage of uncertainty again. Yet high interest rates will keep many investors away. Rents are likely to rise 7% to 9% this calendar year which will see yields improve across a range of property types.
Despite the slow down in market trends, the fundamentals of the Sydney market remain very firm with chronic housing undersupply, low vacancy rates, solid employment opportunities and falling building approvals. I believe the market is yet to find its equilibrium – the early auction results of February will be heavily reported in the media as the new trend.
In summary, the first six months of 2011 should provide a sound window for savvy investors and home buyers to capitalise on changed market conditions. Conditions for a “buyers market” are infrequent in the Sydney property cycle. There are generally more sustained upturns that last longer and favour sellers, while the downturns favouring buyers are more short-lived.
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2. VOLATILITY RETURNING TO THE PREMIUM HOUSING MARKETS
Prestige property markets are proving to be the weakest sector after recording the highest gains during 2009 and early 2010.Australia’s prestige markets, normally associated with water frontage, magnificent views, or urban acreage were once considered to be safe havens during a downturn. The argument was that the absolute scarcity of these properties would protect prices from falling significantly while more common housing stock could be more prone to price falls due to the wider abundance of generic stock in the ‘burbs’.
More recently, however, the premium housing sector has displayed a higher level of volatility. Based on an analysis using the RP Data-Rismark stratified median house price series, during the GFC premium house prices fell considerably more than the broader market place; over the 2008 calendar year the top ten percent of the market saw a -14% fall in Sydney, Melbourne’s most prestigious sector saw prices fall by -12%, Brisbane’s top end recorded a -10% decline and prices in the Perth premium market fell -18%.
The most stable market sectors, based on price, have been the broader ‘middle’ of the market where Sydney and Melbourne continued to record price growth over the reported six month period and in Brisbane and Perth the falls in prices were less than what was recorded in the higher and lower price segments.
Looking forward, once the November interest rate rise is included within the data, the weakness in the more affordable segments of the market may become more evident. Home owners and prospective buyers in these market segments are very sensitive to affordability pressures and there may be further weakness at these lower price points.
The good news for these markets is that the outlook for interest rates is looking increasingly stable. Financial markets are predicting only one further rate rise towards the end of 2011 which will be welcome news across all the market segments.
(Article supplied by RP Data)
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for an obligation free chat. Click here to send us your Wishlist…
Have you ever wondered how some property investors manage to buy multiple properties and amass a large portfolio?
- How do they secure finance for so many loans and how can they afford it?
- What is the right balance between cashflow positive and growth properties?
- How many properties do I need to retire?
- Or is it more about the value of properties?
- How do I protect the equity I have created in my properties?
- What size finance buffer is adequate?
- Should I diversify across different states to reduce land tax?
- Which property types provide the best overall return?
If you have ever asked any of these questions then this seminar is for you! We will cover these meaty topics and more on the night. Bring your notepad, calculator and an open mind to learn.
Date: Thursday 24th February 2011
Time: 6.30pm to 8.45pm (6.00pm for registration, drinks and networking)
Venue: Wesley Centre, 220 Pitt St Sydney
Investment: Early bird discount (book before Friday 18 Feb): Single $37, Double $57
(Standard ticket price: Single $47 and Double $67)
Book now at this link: http://www.stickytickets.com.au/4958
Speakers:
Rich Harvey, Managing Director and founder of propertybuyer
Rich will present many tips that could propel your knowledge to the next level. Rich is a licensed buyers’ agent, property investor and professional economist with over 17 years experience in the property industry. He is a research expert and highly skilled in investment analysis and negotiation techniques that can deliver real savings for his clients. Rich and his team have purchased over $550m worth of property for clients.
As Australia’s leading Buyers Agent, Rich has won 18 major awards including the prestigious National Telstra Business award in 2007 and also named the winner "Best Buyers Agent in Australia" by the Real Estate Institute of Australia (REIA).
2. Leading Independent Finance specialist (Finance Broker) – speaker to be advised
3. Shukri Barbara, CPA and owner of Property Tax Specialists.
Shukri is a CPA with over 20 years experience in public practice and professional associations support service. He combines his skills, not only to benefit clients but his own practice and other business operations. Property Tax Specialists take a holistic approach, developing long term strategies, which encompass client's property, investment, income, business, family and lifestyle goals as well as asset protection needs. He is a great asset for your team of property experts.
Reserve your tickets here: http://www.stickytickets.com.au/4958
“Leadership is a two-way street, loyalty up and loyalty down. Respect for one's superiors; care for one's crew.” Grace Murray Hopper
“We are what we repeatedly do. Excellence then is not an act, but a habit.” Aristotle.
"Opportunity dances with those who are already on the dance floor." H. Jackson Brown, Jr.
"Don't count the days, make the days count." Muhammad Ali
I hope you enjoyed your January market update and we look forward to keeping in touch soon.
To get a professional buyers advocate on your side sourcing and negotiating the best opportunities throughout Sydney and Australia, please call +61 2 9975 3311, click on our buyers wishlist, or email us to find the easier way to buy property.
Warm regards
Rich Harvey
Managing Director
Tel: +61 2 9975 3311
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Many thanks. Rich
Disclaimer: Information presented in this newsletter is not to be taken as financial advice for your personal situation – please consult with qualified professionals before taking any action. (Full disclaimer available on our website: (www.propertybuyer.com.au )
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