According to the recently released  Australian Property Monitors’ Quarterly Housing Report Perth’s luxury home sales are breathing life into a sluggish local market. While all other Australian capitals posted all-time highs for annual house price growth, Perth had a modest increase of 3.1% in the final three months of 2009 - the highest since September 2006.

"While the First Home Buyer sector kept the overall market afloat through the end of 2008 and the first quarter of 2009, it's been the activity at the top end of the market that has driven the extraordinary overall result for 2009," said Matthew Bell, APM economist.

“The price growth seen in the more expensive suburbs in 2009 has largely been a recovery of the price falls that occurred since late 2007 and early 2008,” Mr Bell said.

The western suburb of Churchlands out-performed all others by posting a spectacular year end growth rate of 43.8% bringing the median priceto $525,000 - up $160,000. 

Other suburbs that performed well in 2009 included: 

Houses 

• Guildford - up 30.6 per cent
• Attadale - up 25.4 per cent
• Darlington - up 23.5 per cent
• Nedlands - up 5 per cent

Units

• East Fremantle - up 37.2 per cent
• Shoalwater - up 13.3 per cent
• Bayswater - up 12.6 per cent
• Como - up 12.5 per cent
• Mosman Park - up 10.8 per cent

According to Mr Bell, the market will continue its recovery this year, bolstered by upgraders and investors. “The medium- to- long- term outlook for property prices remains strong, as high population growth, rising incomes and a relative lack of new supply means there will simply be more demand for housing than supply.”

Demand for apartments in Perth’s Western suburbs is set to increase. That’s the word from Richard Young, Principal of prominent Western suburbs agency Caporn Young. He believes it’s a trend that’s driven by a ticking 'population clock' as baby boomers reach retirement age.

Retiring baby boomers favour apartment living as it offers a low maintenance lifestyle. The number of retirees in Western Australia is set to accelerate rapidly over the next decade.

Almost one quarter (23%) of Western Australians will be aged 60 years and over by the year 2021. Compare that with just 15% in 2001.

Traditionally, apartment developments have been concentrated in inner city areas. Not anymore. In recent years there has been an influx of apartments popping up in affluent suburbs such as Nedlands, Fremantle, North and East Fremantle, Mosman Park and Claremont.

Mr. Young claims that retiring Western Suburbs baby boomers are buying apartments close to their existing homes. They’re familiar with the area and have a network of local friends and family. And it’s a trend, he believes, that will drive the demand for apartment living in the Western suburbs over the coming years.

Moving into a new apartment is also an attractive financial option. New apartments are easier and cheaper to maintain than older properties. Retirees can sell their existing home and retain a significant profit after buying an apartment.

In particular, there will be a growing demand for quality developments with spacious units fitted out to a high standard. Recent sales of apartments to baby boomers by Caporn Young indicate that, while they may be down-sizing, they still want a high level of privacy and quality.

Units and apartments have performed well during the past year despite an overall correction in the real estate market. The median price for an apartment/unit in the Western suburbs rose by around 3.0% during 2009.

Anyone who is buying an apartment for lifestyle reasons should consider their choices carefully. Location is a key consideration when buying an apartment. Other issues to consider are veiws, the level of road noise, strata fees, rules regarding ownership of pets and number of renters in the development.

Guest Blogger, Mr David Airey, President of the Real Estate Institute of Australia and long term aussiehome.com client writes...

The Reserve Bank decision to leave interest rates unchanged today following three consecutive increases is GREAT NEWS for home owners. It's good to see that the RBA are listening to the markets and taking note of the downturn in lending.

The Real Estate Institute of Australia ("REIA") was critical of the RBA decision in December to lift official interest rates for the third time and are pleased to see them now taking a cautious approach.

REIA noted that increased interest rates reflects an improving economy, however another rate rise would have DAMPENED THE MARKET AND THREATENED CONSUMER AND BUSINESS RECOVERY. Four rate rises in as many months would have been too much too soon, especially since we do not yet have the full picture on December quarter economic activity or property sales. The reality of the market is that housing lending has dropped along with business loans and a month with no change is definitely what was needed.

Even more pleasing was to see all the economists and financial writers having to redo their prepared scripts on a rise in rates and the disappointment across their economic faces. I've been critical of those financial writers who actively encourage rate rises and fuel the focus on "price bubbles" and "inflation". I'm not (thank goodness) an economist. I'm a realistic and practical person who not only works at the coal face but I see and speak to estate agents and Australian home owners on a daily basis. I hear them telling me about the subdued market and reduced activity since the 3rd rate rise in December. And I'm starting to hear from an increasing number of first home buyers who are already struggling to meet increased payments.

The reality of the 3 rises plus the extra .25% that the banks added has resulted in an average 1% rise in rates since October. The average variable is around 6.5% still higher than many other countries and business rates – wow! Add 2 or 3 per cent.

What concerns me is the doom sayers who reckon that rates are artificially low. So what? Why do they need to be high? What's wrong with a booming economy and growth and a strong property market and full employment? Maybe these are the reasons I never made it through economics.

Other commentators such as Marcus Padley are worth quoting:

The RBA have surprisingly left rates unchanged at their meeting today.

Main reasons appear to be that:

·         Credit conditions are still "difficult" with businesses still struggling to find credit.

·         Global economic recovery is only "modest".

·         Inflation is not a problem.

·         Commercial banks have lifted rates more than official rates ... doing the work for the RBA.

·         The Chinese are tightening policy.

·         They have yet to see the impact of recent rate rises kick in.

·         Rates are on hold globally.

They do hint that they will raise rates in the future to ensure inflation is kept under wraps.

The suggestion already is that they are moving to a more cautionary stance and may well keep rates on hold now until proven necessary to raise them.

We may see rates on hold for some months. There is also concern that they have got the wobbles about sustained economic growth this year with China tightening a threat to Australian economic growth.

[ Credit for article: DavidAirey.com.au blog]

The newspapers and blogosphere has been alive with the news of the recent record price achieved for a property in Australia, with the sale of 43 Saunders Street, Mosman Park, for A$57.5 million.

I remember walking round the property a few years ago when it was first put on the market (for a rumoured $80mn) as we developed the individual property web site for the real estate agent, William Porteous. Everything about it was absolutely breathtaking - the views, the sheer physical size and presence, the tennis court, the multi layered levels and finishes throughout.

With the resource riches in this State, it might not be a surprise that at the very top end, WA more than holds its own and now claims the record for the most expensive property in the land.

What does this mean for the rest of us? Probably not much; some might decry the multi-squillion riches in the hands of the few, others might be proud that WA now holds the record; others might have minimal passing interest and a shrug of the shoulders for what has happened ... although I know that those involved in this sale put in the hours (years) and reaped the rewards, and to them, we say congratulations. Records are meant to be broken, and this is one amazing record.

Property Prices are on the move and, reviewing the recent media attention, interest rate rises appear to be heading our way soon and the banks are lining up with new products to secure your business.
 
" BankWest Mortgage Could Spark Price War.  A NEW price war is set to erupt across Australia’s $860 billion home lending market, with Commonwealth Bank owned – BankWest to launch a new mortgage product that will have an interest rate cap until late 2012." The Australian, September 2009
 
So the question that is on the mind of many investors appears to be...“To Fix or Not To Fix?”
 
This doesn’t have to be a tough decision; this exclusive Mortgage Bite is here to help you through the mortgage maze.
 
Do you:
        Want predictable repayments?
        Foresee major changes to your family arrangements, job or business?
        Believe rates will rise in the near future?
        Fully understand exit penalty costs with early repayment?
 
If you answered YES to most or all of these questions, a fixed rate loan may suit. It could be time to lock it in now.
 
Why should you choose a fixed rate loan?

        It will help you budget to manage your cash flow, stress free.
        You’re looking for certainty in your monthly loan repayments to the bank.
        Property owners who have a number of financial responsibilities can feel secure knowing that their repayments will be consistent, and that their interest rate is protected from further increases during the term of the fixed period.

Is a variable loan is the way to go?
 
        You will benefit if the interest rates increase.
        Minimal exit costs on early repayment (check with your lender).
 
A Variable housing loan gives flexibility.  Any surplus cash each month can help to pay the loan off faster.  Extra repayments made to the loan can also be redrawn should the funds be required elsewhere.

To Fix or Not To Fix - what would your answer be at this moment?

Most expert pundits would say even Blind Freddy could have seen that interest rates were bound to rise when the RBA met today and although a rate rise of just 0.25% is pretty small, leaving the new rate at 3.25% which is still extremely low, a rise is still a rise.

It hasn't taken long for some in the real estate industry to warn that now would be a good time to buy as a rate rise could see prices increase but is this a real concern?

With Spring in the air as we enter the traditional real estate selling season coupled with the announcement of the recent natural resource contracts and the general belief Australia is moving out of the GFC, Blind Freddy could have a go at predicting the WA Real Estate Market is going to continue to firm up as we move toward the end of the year and he would most probably be on a winner here to. Some believe it already has. Maybe the RBA concur.

There may be any number of good reasons to buy real estate now but the fear of a price rise due to a 0.25% interest rate rise? Well, you tell us...

In our last post, we argued how the evidence from our clients and our site pointed to the fact that the property market had already bottomed, probably in March 2009 (as we had noted, at the time).

Not everyone agreed, but as someone wise once said, 'at the bottom of the market there is no one around to ring the bell'. But, as things get better, people tend to notice, and if evidence convinces most of us that the worst is behind us, so this feeds more positive sentiment, which then becomes self fulfilling. 

More evidence is now pointing to a clear sign that property market improved in the June quarter of 2009.

Out of 273 suburbs across the Perth metro region, 71 saw their median (middle) price rise and 80 stayed the same. Put it another way, less than half fell, and the overall Perth median price remained the same at $430,000. In the previous (March) quarter, only 36 suburbs saw their median price rise, 53 stayed the same, and no less than 184 (68% of them) went down. Going back another three months, in December quarter 2008, 171 (63%) of suburbs fell across Perth metro.

As the market turned the corner from the March to the June quarter, so prices were still adjusting. In the March quarter 2009, 21 suburbs had a median price over a $1million. Three months later, 5 suburbs had dropped out of the $1million club. The top 16, as of June 2009, is shown in the table shown (together with the change in their position since March 2009).

There were times in 2008 when the property market was dead, and I mean completely dead. As a dodo. It had 'ceased to be', it was an 'ex market' (... you know the rest). In some suburbs, weeks went by with hardly a whisper of sale, and some real estate agents were taking extended holidays (not always voluntarily).

Looking back now, it seems fairly clear that November 2008 was probably the bottom of the market in terms of activity, and March 2009 was the bottom in terms of prices. As 2009 dawned, so sales started appearing in increasing numbers, with the first home owners grant and a 4.5% cut in interest rates making their presence felt.

From Feb 2009 on, the 'sub $500,000' housing market rattled along, and eventually, as the impact of sustained lower interest rates, stimulus packages and better economic news filtered through, so confidence started to return from the 'bottom up'.

Buyers, previously put off by the uncertainties in the market (and prospect of further price falls) started to realise they may have seen the worst, and now was the time to get in, or trade up. Investors figured the lower priced houses and higher rental returns now made the sums add up. Sellers were being more realistic (prices had fallen 20% after all), and the prices they expected matched what the buyers were willing to pay.

Today, 18 months after the slowdown began, properties are turning over quite quickly, as they are coming on well priced and demand is there. Throughout July and August 2009, most real estate agents have been selling again in earnest. Traffic to aussiehome.com has soared as renewed interest in the property market is being felt.

At the tightest extreme of the property market back in September 2006, there were just 2500 properties on aussiehome.com. By November 2008, listings had ballooned out to 9000. Today, we are back to less than 6000. And so the cycle turns. Some have called the current market 'normal' - and this is probably true, but one thing seems quite clear, the bottom of the market in the current cycle is now behind us (thank goodness), and we should be able to look forward to an upswing from here. One hopes the upswing will be measured, not get out of hand, and thus be sustainable. Will we learn our collective lessons from the cycle of 2001-2009? Only time will tell...

[ photo credit: flickr.com, 'Bombay Beach' by Ashcroft54 ]

Saying things are 'normal' does not make headline writers reach for their laptops, nor will it light up the blogosphere; but in fact we've not seen a 'normal market' for a while...

"If I was to categorise the market at the moment, " says Rob Druitt, (aussiehome.com client and Principal of Druitt & Shead 1st National based in Scarborough), " it would be that it's a normal market. There is interest out there from buyers but you have to work at it, prices are right and properties are selling. There's the 'right' amount of properties on the market for sale. The newspapers are only interested in 'booms' and 'slumps', but at the moment, I like it - it's normal ! "

Jonathan Keys from Brockway Keys Real Estate (another aussiehome.com client, based in Fremantle) agrees, " I'd say the market is normal; and for many agents who have only been around for 5 years or less, they've not seen it like this. I like it, you work hard, and the rewards are there for your effort. "

So, do we love the normality of things at the moment? Is this how it should be - calm, measured, properties selling, but not for crazy prices? People having time to look, consider, make an offer and get what they want. Enough choice and variety - good for everyone? Let's praise the market for being normal! Now, that would make a refreshing change... and is newsworthy.

(Photo Credit: Normal Theater, Normal, Illinois, USA, by Katie White Snow, Flickr.com)