Nobel Finance Sydney – Money Matters Newsfeed

House prices are expected to soar 20 per cent over the next three years, a new report has found.

According to QBE LMI’s Australian Housing Outlook report, improving economic conditions are expected to facilitate further house price growth in Sydney, Adelaide and Perth.

More moderate growth is expected in Brisbane and Hobart, where affordability is not as strained and there is no sustainable dwelling deficiency.

QBE LMI chief executive officer Ian Graham said the Australian property market gained momentum in 2009 on the back of the First Home Owner’s Grant Boost Scheme (FHOGBS) and record low interest rates.

However, the expiry of the FHOGBS at the end of 2009 and several interest rate rises between October 2009 and May 2010 effectively moderated house price growth in the first half of 2010.

“The decline in first home buyer demand in the first half of 2010 is primarily due to first home buyer activity being pulled forward into 2009 because of the FHOGBS. However, demand is forecast to return to more normal levels, believed to be around 130,000 to 140,000 loans approved, in 2011” Mr Graham said.

“Future median house price rises will be underpinned by a deficiency of dwelling stock across most capital cities, which in turn will lead to tight vacancy rates and solid rental growth, flowing through to investor demand.”

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The latest property and housing finance figures suggest the recent slump in property price growth may soon be over

Despite Another fall in housing finance in the month of June, low property growth in

most capital cities and a low number of building approvals, a recovery of the property market is on the horizon, based on a broad analysis of the latest figures.

In June, owner occupied finance fell 3.9 per cent from the month prior, according to the ABS.

Building approvals were down in June by 3.3 per cent overall, according to the ABS, with private housing development hit the hardest.

But these factors do not mean that market growth will continue to slide in the months to come. In fact, there are a few positive signs that indicate that some areas will be on a steady growth path in the 12 months to come.

Westpac senior economist Andrew Hanlan said the latest slump in price growth has been “expected” in the wake of the RBA’s interest rate normalisation strategy and the recent dip in consumer confidence.

Westpac’s consumer sentiment index in August showed renewed consumer  confidence, with a reading of 119.2 compared to 113.1 in July. Further, the RBA’s decision to hold the cash rate since May, strong population growth and strong employment growth are sure to continue to boost consumer confidence and borrowing over the months to follow.

While lending figures dropped off in the upgrade and investor sectors in June, overall there’s been an aggregate increase over the past months, indicating a steady upswing.

Investor numbers fell in June by 3.6 per cent, but since January 2009 lending to investors has actually risen by 29 per cent.

And further gains can be expected in response to strong rental income growth, particularly in the unit sector.

Units have continued to eclipse house growth by an average of 0.3 per cent over the last five years and gross rental yields have remained remain strong at 4.8 per cent (4.0 percent for houses). By Belinda Luc

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Self-managed super funds (SMSFs) are increasingly

investing in property, according to new figures. SMSF administrator Multiport has revealed that, out of the $1.lbn invested in funds it administers, 17% was allocated to property either directly or through trusts and funds as of 30 June.

This brings SMSF property investment levels to their highest level since December 2008. Multiport CEO John Mcllroy attributed the increase to the better performance of listed property trusts. The figures also revealed that SMSF asset allocation is still dominated by investment in shares, with Australian shares taking up 40% of SMSF assets (down from 42.6% in March). Cash and short-term deposit holdings accounted for 21.4% of SMSF assets.

Tags: Real Estate, SMSF
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Australia is not in the middle of a housing bubble according to the Real Estate Institute of Australia (REIA), contrary to recent comments by global investment management firm GMO’s chief strategist Jeremy Grantham.
REIA president. David Airey said: “What we are experiencing in the housing market is normal growth for house prices. If Australia was in the midst of a so-called housing bubble, then we have been there for some time. REIA’s data highlights that historically, median prices, compared to income, have been relatively stable for the past 10 years, taking into account normal fluctuations.”
According to the REIA over the period December 1996 to December 2009, median house prices increased from around $160.000 to around $500,000, a trebling in 13 years. But within this period there were four phases.
From December 1996 to September 2000. median house prices in Australia showed a moderate average growth of 2.1% per quarter. From December 2000 to December 2003. house prices appreciated at 3.9% per quarter on average. Then from March 2004 to December ?008, the average growth slowed to 0.8% per quarter. During 2009, growth of median house )rites picked up pace to 2.9% per quarter.

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The number of dwelling commencements rose slightly in the March 2010 quarter, the Housing Industry Association (HIA) has revealed. HIA chief economist Harley Dale said that total housing starts increased by 4.3% in the first quarter of 2010 to an annualised level of nearly 170,000. HIA’s forecast was for a 4% rise. He added: “There was a strong burst in ‘other dwelling’ starts in the March 2010 quarter… The strong run up in building approvals through to early 2010 is not translating into new home starts as quickly as is desirable.”
Harley cited “unjustifiably tight credit conditions”, uncertainty about the magnitude of rate rises in 2010 and some approvals simply being reissued with no firm plan for commencement as reasons for a soft first quarter update for new home building.
The HIA continues to expect a relatively healthy rise in housing starts in the 2009/10 financial year, but claimed a positive outlook for 2010/11 and beyond is far from assured amid supply-side obstacles.

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