Price movements
According to the “market-leading” RP Data-Rismark National Home Value Index, home values in Australia rose by an exceptional 1.9 per cent during the month of August. This brings cumulative capital growth in the first eight months of 2009 to a better than expected 7.9 per cent. This is also the single highest monthly index result since the RP Data-Rismark National Home Value Index began in January 2005.

Across all capital cities, dwelling prices are higher than a year ago. The RP Data-Rismark Hedonic Australian Home Value Index is now 3.8 per cent higher than the previous peak set in February 2008.

Unemployment is one of the critical factors determining affordability and hence house price growth in some segments. While it was predicted that unemployment may reach up to 8.9% the forecasts have now been scaled back to top out around 6%. Consumer and business confidence has turned around substantially in the last few months.

Price growth predictions
A report commissioned by QBE (researched and written by BIS Shrapnel) “Housing Outlook 2010 – 2012” confirms that current low interest rates have helped to alleviate the mortgage pressure on households while bringing housing affordability back to its most attractive level for almost a decade.

The report predicts solid price growth across all capital cities as follows:

Adelaide 23%
Sydney 21%
Melbourne 19%
Darwin 17%
Brisbane 15%
Hobart 15%
Canberra 12%
Perth 12%

I believe we are at a point in the property cycle where we are likely to see sustained economic growth and property will be generally favoured as a safe asset class for investment. There will no doubt be plenty of media speculation about whether the stimulus package should be wound back and will we have a double dip recession etc.

The two key fundamental factors driving the property market for the next decade will be (1) population growth and (2) the under-supply issue. This does not mean you can go out an buy a property anywhere and hope to be successful. There is no compromise on due diligence. Research is king!

Undersupply–a solid floor for price increases
The graph below demonstrates my point entirely – the upper line shows total demand for dwellings while the lower line shows supply. The bars show how much we are undersupplied. By the end of this year Australia is predicted to be short by over 207,000 dwellings (rising to 271,000 by end of 2010). As an avid property investor this makes me excited!!

Interest rates
The Reserve Bank of Australia released the minutes of their October board meeting earlier this week, providing an insight into the deliberations behind the recent decision to lift the official cash rate from 3.0 percent to 3.25 percent. The minutes provide a valuable insight into how the Reserve Bank Board views the domestic and global economic conditions and how their views translate into changes in Australia’s monetary policy. The minutes highlight the improved economic prospects of major regions around the world with particular attention given to the improved outlook for our major Asian trading partners.

Summing up the domestic economy, the RBA minutes state “Growth forecasts were tending to be revised up. Measures of both household and business confidence had recovered, household spending had remained relatively resilient, house-building activity was in the process of picking up and the risks of a sharp contraction in business investment had receded noticeably.” The RBA minutes also made specific reference to the Australian housing market, referencing the August results of the RP Data-Rismark Home Value Index with housing values up 2 percent over the month. Additionally, the minutes clearly suggest there is some growing concern amongst the RBA board about the medium term outlook for inflation, with the board suggesting inflation could start rising again in 2011.

On balance, the board minutes reveal there is still some caution about the durability of the recovery, particularly as domestic stimulus measures are wound back. The economic prospects of the major economies around the world, although mostly improving, are still uncertain.

The final decision to lift the cash rate by 25 basis points was based on the risk of another downturn being relatively minimal compared to the improvements in the health of both the domestic and global economies: “Overall, members concluded that, while downside risks to the domestic economy could not be ruled out, they had diminished significantly over recent months. This meant that the balance of risks was now such that the current very expansionary setting of policy was no longer necessary, and possibly imprudent.”

While we are set for a series of quick rate rises to take the cash rate back to around 5%, this provides opportunities for buyers that can manage their debt risk and get into the property market at prices that make sense.

In summary:

• Prices are on the move again
• Undersupply is providing a solid platform for future growth
• Interest rate rises will dampen some demand but also exacerbate housing shortages
• Expats and foreign buyers are showing increased demand and interest in Aussie property
• Investors are starting to come back in force and will take up slack as first home buyer depart the market
• Don’t let the media dominate your decision making

2. SWITZER TV INTERVIEW

I was interviewed by Peter Switzer on Sky Business channel this week about the direction of property prices and where I saw the market going.

You can view this short segment by clicking on the link below:

3. CLIENT STORIES

(1) Speeding up the search process

Buyer type: Home Owner
Buyers brief: Large 2 bedroom apartment in close proximity to train station
List price: $ 600,000
Purchase price: $ 570,000
Saving: $ 30,000
Time taken: 21 days
Time taken: 21 days

Buyers’ agent comment:
Roscoe was looking for a very large 2 bedroom apartment with large living space and an easy commute to his work in the city. He had been looking for quite some time and was far too busy with work. Within 2 weeks I located a huge apartment in excellent condition, within 300m of the train station – a 20 minute daily commute to work. The bonus was that is was also extremely private, quiet and had fabulous bush views – in Chatswood. Needless to say, Roscoe was thrilled with his purchase.

Client’s comment:
I originally engaged Property Buyer as I was working very long hours and I was unable to get the necessary time to do the right amount of searching for my new home and sleep. The team took on my very specific needs and filtered out all the inappropriate noise out there. Although Matt had found my home within 2 weeks, I was not convinced as I thought it was all too fast. Matt continued to take me on the journey for the next 2 weeks it took me to realise that whilst it may have been fast, it was right. Luckily, I realised this soon enough and Matt managed to secure my new home and I am very happy. I would strongly recommend Property Buyer both from the time perspective and from their understanding of your needs. Good work team! Roscoe (October 2009)

(2) Challenging the bank valuation saves clients deposit

Buyer type: Investor
Buyers brief: Eastern suburbs apartment with solid yield
List price: Auction
Purchase price: $ 406,000
Time taken: 45 days

Buyers’ agent comment:
After successfully concluding a deal on a fantastic one bedroom apartment in Sydney’s eastern suburbs with a great yield, the client sent the signed contract to their bank for the mortgage valuation. The banks valuer came back with a ridiculous valuation (at $32k below contract price) and commented that we “over-paid because we bought it before auction”. Obviously the client was distraught at the prospect of losing the deposit. We worked tirelessly with our contacts as well as another bank to finally get the loan approved with a new valuation at purchase price. The original valuation was almost 10% below. The clients valued our constant input all the way to the end and the fact that we did not leave them to face this nightmare alone.

Client’s comment:
“Throughout our journey we were faced with a dilemma with the banks complete blundering of the finance. This was an incredibly stressful period for us as this mess actually forced us past our settlement period. However, Saul went in to bat for us with everyone – he dealt with our mortgage broker, the vendor, the solicitor, even the bank’s valuer. No task was too big or too small for Saul. He managed the entire process, enabling us to focus on our daily lives at the same time keeping us on track. Throughout Saul’s counsel, we kept our cool and were finally able to settle.

Saul completely took away the stress of purchasing a property. It has been so refreshing to actually receive quality service as this is something neither of us have seen in a long time.” Michelle & Jarrod

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 or email us for an obligation free chat.
Click here to send us your Wishlist…

4. SYDNEY HOME BUYER SHOW - Sydney Convention Centre - 31 October – 1 November 2009

Buying a home or investment property is one of most important financial transactions you will ever make.

So if you’re looking to buy property and keen to make the right decisions and avoid costly mistakes - then you simply can’t afford to miss visiting us at the Home Buyer Show. You’ll find us at Stand H27.

The Homebuyer show is the largest event in Australia dedicated to helping people finance, find and buy their next home or investment property. You’ll get on the right path to the right property with over 30 free seminars and workshops on offer each day - delivered only by impartial experts from government and industry associations that you can trust. I will be guest speaker on the Main Stage and the Lounge with the Experts and will be available to answer your questions in relation to finding and buying a home or investment. I’ll be presenting at 11.15 am to 12.00 pm Saturday alongside the REIA President on the topic “Market Outlook and what it means for your next purchase.”

I will also be at the “Lounge with the Experts” presenting on “How to pick property winners” 4.00pm to 4.30pm Saturday afternoon.

For the full seminar program see the link below: http://www.homebuyershow.com.au/seminars/sydney

The propertybuyer team will be there along with over 100 leading companies with everything the home buyer or investor needs under one roof, including new and established homes, apartments, townhouses, units, builders, house & land packages, holiday houses, land estates, home loans, real estate agents, property investment advice companies and much more.

Heaps of New Products and Show Specials will also be on offer plus there’s dedicated Zones for Apartment Buyers and Property Investors.

As part of a special promotion, we are pleased to offer unlimited half price tickets ($7.50) to the Home Buyer Show (normally $15). Simply visit the website www.homebuyershow.com.au and quote the special promotional code HOMEBUYER when purchasing your tickets.

5. FOLLOW ME ON TWITTER

You can keep up to date on the most recent happenings in the property market by following me on Twitter – just click “follow” when you login and search for my name: “Richharvey”
http://twitter.com/richharvey

6. INSPIRATION CORNER

“Challenges are what makes life interesting, overcoming them is what makes life meaningful”. Ralph Waldo Emerson

“Routine and discipline will set you free. Rather than getting tied up in knots fretting over what needs to be done, allocate time and give yourself a reward when it’s achieved!” Rich Harvey

”Strive not to be a success, but rather to be of value." - Albert Einstein

“Only those who risk going too far can possibly find out how far one can go.” T.S. Elliot

I hope you enjoyed your October 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 your wishlist so you can find the easier way to buy property.

Warm regards

Rich Harvey
Managing Director
Tel: +61 2 9975 3311
www.propertybuyer.com.au