Australian Capital Cities: Where's Hot, Where's Not

DARWIN was Australia's best-performing capital city for property values during the past quarter - up 5.2 per cent - and showing year-on-year growth of 4.2 per cent, according to the latest figures from RP Data.

The RP Data-Rismark August Hedonic index shows Adelaide is the weakest performing capital city, with the change in dwelling values sliding 2.2 per cent during the past three months.

The monthly figures were more optimistic though for Adelaide, showing 1.4 per cent growth for August.

Sydney and Melbourne both recorded only 0.1 per cent growth for the month, but are performing better for the quarter, at 2.4 per cent and 2.5 per cent respectively.

RP Data research director Tim Lawless, said the figures showed a flat winter season that could be the foundation of a strengthening Spring.

Combined with the lowest transaction levels since the late 1990s, prices could also soon be expected to drift upwards after years in the doldrums.

"Spring is going to be better than last year,” Mr Lawless said.

"This is the first time that we have seen total listings across the capital cities the same as they were last year.”

Mr Lawless said lower listing levels were good news for vendors because it meant there was not as much choice in the market which could improve prices.

"In November last year, the listings were 30 per cent higher than they are now,” Mr Lawless said.
"They are currently only 0.5 per cent higher than last year, which means that we have a good benchmark level."

From a supply perspective, it’s a sign that there aren’t as many homes on the market at the moment and that means homes are selling a bit faster and vendors discounting a little less but transaction numbers stabilising.”

Mr Lawless said transaction volumes were at their lowest since 1998 - and were currently lower than during the Global Financial Crisis.

"At the moment based on June data, transaction volumes are 7 per cent lower than the same time last year,” Mr Lawless said.

"We’re averaging 30,000 sales each month and that’s fairly steady across 2012.”

But the lack of stock was being treated calmly by potential buyers who are showing patience about finding exactly the right home.

"A lot more people are attending local houses and showing interest in the market place but there is still not a level of urgency that will push buyers into making a purchase decision rapidly,” Mr Lawless said.

“Purchase decisions won’t be rushed, buyers are playing vendors off against each other and are negotiating pretty hard.”

Figures from the data showed:

- Hobart prices grew 3.9 per cent for the year to date
- Sydney prices grew 1.9 per cent for the year to date
- Darwin prices grew 8.4 per cent for the year to date
- Brisbane prices grew 0.6 per cent for the quarter
- Perth prices lifted just 0.2 per cent for the quarter

House Prices Flat in August

 

AUSTRALIAN house prices were flat in August, although Adelaide and Canberra experienced some growth. 

  
House prices in Perth and Hobart fell more than one per cent in the month and there was little price movement in Sydney, Melbourne and Brisbane, the RP Data-Rismark August Index showed.
Adelaide and Canberra prices increased more than one per cent, while Darwin home values fell half a per cent.

The index posted a 1.6 per cent increase in Australian home values over the past three months but a fall of 2.4 per cent over the year to August.
During the quarter to August, Darwin was the best performing capital city, registering 5.2 per cent growth.

This was followed by Melbourne at 2.5 per cent, and Sydney at 2.4 per cent.
Perth and Brisbane recorded marginal growth of 0.2 per cent and 0.6 per cent respectively over the three-month period.

RP Data research director Tim Lawless said Sydney dwelling values increased in five of the past eight months, helping to provide a cumulative capital gain of 1.9 per cent over the year to date.
"Sydney is proving to be one of the most consistent performing capitals this year," he said.

A rebound in Melbourne was also encouraging, given more worrying signals earlier in the year.
"Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide," Mr Lawless said.

"The big question is, can this growth be sustained?"

Mr Lawless said the spring selling season would be a good litmus test.

The highest rental yields for houses in the quarter were in Darwin at 5.8 per cent and the lowest yield were in Melbourne at 3.6 per cent.

Aussie Banks Worth More Than Europe's Combined

FOR the first time in history the value of Australian banks are now worth more than the Eurozone. 
 
The Commonwealth Bank made a net profit of almost $7.1 billion, the biggest ever reported by an Australian bank. That boils down to a daily profit of almost $19.5 million or more than $13,000 a minute.

 ANZ  posted a $4.4 billion profit for the nine months to June, an increase of 10 per cent.

CBA chief executive Ian Narev told the Adelaide Advertiser that he is “proud and not embarrassed” by the massive profit surge. He said the results boil down to strong Australian economy and the confidence of their shareholders.

“The people who own this group. . . 60 per cent of them are Australian households directly, that's 800,000 Australian families, “Another 20 per cent of our shareholders are Australians who own them directly through their pension funds.

“So the shareholders who we are doing well for are millions and millions of Australian households,” said Mr Narev.

ANZ's Australian, New Zealand and Asian operations, chief executive Mike Smith told news.com.au the group attributes their success to effective management of ongoing funding and competitive pressures. He also said ANZ had picked up market share in deposits, mortgages and business lending

Other financial analysts have said the massive profits can be explained by the fact that unlike European and American banks, Australia have not loaded up on subprime debt, bad real estate loans or “piles of dodgy foreign debt”.

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Home Owners Forced to Take Super - Australia Mortgage

HOME owners have raided their superannuation funds of a record $100 million in last-ditch bids to avoid foreclosure, new government figures have shown.

The surge in mortgage-holders seeking emergency access to their savings has alarmed housing and social welfare groups, who warn many families are still struggling to meet loan repayments despite steep cuts in the interest rate

With distressed owners receiving an average of $15,250 each, there are also concerns some super accounts could be drained of more than a third of their value. The number of households in serious financial trouble has worsened despite mortgage lending rates falling about 1 per cent in the past six months and nearly 3 per cent since their peak in mid-2008.

Figures obtained by The Sun-Herald showed 6500 home owners were given emergency access to their super last financial year to prevent an imminent foreclosure.

A Commonwealth Department of Human Services report found $99.38 million was released, up 25 per cent on 2010-11 and well above the disbursements in the aftermath of the global financial crisis.
It also marks the third year in a row that the number of people applying for, and being granted access to, their nest-egg has increased.

A campaign manager for Australians for Affordable Housing, Sarah Toohey, said years of house price growth had seen debt balloon and forced households to devote an unsustainable amount of income to meeting mortgage repayments.

''It's alarming and it shows that housing affordability is about more than just interest rates,'' she said.
''The sheer size of what people have to borrow to get into the housing market now really puts household finances under strain.'

Sydney's Housing Market to Continue to Grow

Sydney is Australia's most populous city and its housing sector offers investors unique opportunities with the security that comes with investing in a large and rapidly expanding market.

Property prices in Sydney have increased 25 per cent in the last four years, during which many other housing markets around the world have stagnated or even gone backwards.

The reason that Sydney's housing prices have continued to rise is simple - more people want to live there. Famous for its landmark Harbour Bridge and Opera House, Sydney is the business and financial capital of Australia, with an ideal climate and a relaxed yet cosmopolitan lifestyle.

Sydney has nearly five million residents and its annual population growth rate of 1.6 per cent is higher than the Australian average. It is also higher than that of any major western city outside Australia, yet less than half of this increase comes from births.

Most new Sydneysiders are overseas arrivals who come to Australia to start a new or better life, seeking employment or education opportunities for themselves or their children. They have created a steady demand for around 30,000 more dwellings each year, pushing up prices and making Sydney the most expensive city in Australia to buy a house.

The median price of a Sydney house is now around A$620,000 (S$786,740) and it is rising. Landed properties can be purchased on the outskirts of Sydney for around half this amount, but they are located far from the city centre. Sydney's idyllic harbour side location brings problems, as much of the land is locked away in parks or reserves and there is less available for housing. The urban footprint has spread as far south, north and west as there is land available.

It is almost impossible for overseas arrivals to buy a home until they settle and establish themselves, which can take many years. This has led to a rise in Sydney's rents, which are higher than any other major city in Australia.

High rents and prices have changed Sydney's landscape. They have led to the abandonment of the dream of a landed home for many young Sydneysiders and led to a boom in apartment living. Over half of Sydney's dwellings are apartments or "home units" as the locals call them.

The new medium and high-rise apartment blocks contain gymnasiums, swimming pools and garden barbecue areas. The units are fitted out to attract renters, while their design lowers maintenance costs for investors. Many of the suburbs where this transformation is occurring - such as Pyrmont, Ultimo, Camperdown, Double Bay and Broadway - are located close to the central business district and in the urban centre itself.

What makes these dwellings ideal for investors is that prices for home units are still less than 70 per cent of those of similar sized houses.

The Sydney inner urban market is unique because there are fewer development projects in the pipeline than there are in other cities such as Melbourne even as the rental demand is far higher. Rents in these areas are escalating as a result and housing investors from Singapore can buy off-the-plan units with confidence, knowing that both the rental yield and the value of their investment are likely to rise in the coming years.

Property Crash Just a Myth

ONCE again, the apocalypse has been averted and the four horsemen have ridden off to create havoc elsewhere. Rather than the much-heralded assault on the Australian residential housing market, as has been predicted for the past five years by an ever-increasing host of international and domestic doomsayers, we are instead witnessing an orderly retreat.

There's little doubt that Australian property is likely to be subdued for at least the next few years and that values here are likely to decline. As in previous times, the property market appears to be settling in for a prolonged hibernation after a debt-fuelled run-up. But those gleefully predicting a US-style crash in the Australian property market are so far wide of the mark it beggars belief that anyone bothers to listen.

About the only place there has been a US-style property market crash in the past few years is in the US, a catastrophe sparked by reckless lending and a total failure of regulatory oversight that ricocheted around the globe in 2007, sparking round one of the global financial crisis.

Those American-style excesses (loans to borrowers with no ability to repay) were almost universally repelled in this market. As a result, we've largely avoided the after-effects. That hasn't stopped the hyperbole by an ever increasing mob of normally reputable commentators. But the facts are far more sobering.

The official figures released this week by the Australian Bureau of Statistics clearly show a downward trend in the domestic housing market. Overall, we experienced a 4.8 per cent national decline in the 12 months to the end of December. But the manner in which the declines were carved out provides the most interest. Australia may be a nation in the throes of a once-in-a-generation economic transformation, with resources squeezing out traditional industries, but there has been little evidence of that in demand for housing.

Among the biggest surprises was that Brisbane, one of the beneficiaries of the resources boom, led the housing market price declines with a 6.7 per cent drop in the year to the end of December. Adelaide and Melbourne were next. But the biggest surprise was the pullback in Perth residential real estate, shedding a whisker under 5 per cent. Unlikely as it may seem, Sydney was the best performer of all with a decline of just 2.7 per cent over the year.

Australian residential real estate is expensive on just about any measure. And it is clear it has reached a tipping point, for it has outgrown the capacity of Australians to service the debt required to buy a property. Not only that, the stronger dollar has made our property more expensive for foreign investors. But to employ that argument as the exclusive rationale for a domestic property market collapse is naive and ignores basic economic fundamentals of market operations - supply and demand.

Given the tighter lending criteria imposed upon our banks during the boom years up until 2008, the only way that we will experience an American-style property crash here is if there is a serious lift in unemployment, which would spark loan defaults and a flood of distressed property onto the market.

That's not impossible. But it is highly unlikely given our current historically low unemployment level and our place in the global economy as a resources supplier plugged into the only growth region in the world right now.

For a US-style property collapse to occur here, we would need to see sovereign debt defaults across Europe, the disintegration of the European Union and an international banking crisis that would cripple even China. And if that happens, we'll have bigger concerns than the price of our homes.

As with any market, there is a delicate balance between supply, demand and price. For those pining for ''the good old days'' when we had ''affordable housing'', it is time for a reality check.

Housing was never affordable. All that's changed in recent decades has been a shifting of the equation surrounding supply, demand and price. In the good old days, the only reason housing was far cheaper - on an average earnings basis - was credit was restricted. Up until financial deregulation in 1983, our banks had to labour under the yoke of federal regulations that prohibited them from offering home loans to customers above 13.5 per cent. Credit was in such short supply, few were offered enough cash to buy a home.

It wasn't until our banks discovered cheap offshore credit in the mid-1990s, and brought the cash onshore, that we suddenly had ''affordable'' home loans. But the cheaper credit simply shifted the price of real estate higher.

It was a windfall for the banks, for the real estate boom resulted in ever larger loans. And those larger loans bloated the earnings of our major banks, a financial perpetual motion machine that now came to an end more than two years ago.

As a nation, it's left us with a serious, but not insurmountable foreign debt problem. (That's right, it's a private, not a government, debt that is the problem.)

It also is the reason global ratings agencies are considering downgrading our banks, particularly given the threat to international finance from Europe. And it goes a long way to explaining why our banks have aggressively switched back to domestic funding, to raising their cash at home. The adjustments are in place. A crash? Don't bet the house on it.

Property Crash Just a Myth

Chinese Buyers Pick Up Property in Australia

Foreign developers made up about 30 per cent of the Australian market last year, and China took up 9 per cent of that – an increase over previous years.

The China Daily News reported that more than 1,200 apartmentswere either planned, being marketed or were under construction by Chinese companies in Australia in the fourth quarter of 2011, according to real estate firm CBRE. The Chinese mainland was only led by Singapore (37 per cent), Hong Kong (20 per cent) and Malaysia (12 percent ).

They did not offer comparison numbers for 2010.

Chinese investment is being driven by rising Chinese wealth, a desire for secure investment, and freehold laws. “Unlike in China, once a buyer purchases property in Australia, it’s theirs forever and can be passed down from one generation to another”, Melbourne real estate agent Chris Bevan told China News Daily.

Bevan said his recent sales to buyers from Shanghai ranged from two-bedroom apartments priced at $300,000 to a luxury beach-front home for $18 million around Melbourne.

He said JPDixon, the company he represents, has attended property shows in Shanghai for the last three years. “(This)helps keep our real estate and economy growing,” he said. Another factor driving investment is the Australian education system: There are some 160,000 Chinese students in Australia, and many Chinese families who can afford it would prefer to buy an apartment nearby.