The Property Council of Australia and the Residential Development Council believe the Building Better Regional Cities funding announced today paves the way for improved infrastructure needed to support a ‘Sustainable Australia’.

The funding, announced by Prime Minister Julia Gillard, will invest $200 million to help build up to 15,000 more affordable homes in regional cities over three years and will relieve pressure on our major capital cities, so that Australia can grow sustainably.

Caryn Kakas, Executive Director of the Residential Development Council, strongly supports the announcement, which is modelled on the successful Housing Affordability Fund (HAF) which ties funding dollars to performance outcomes.

The HAF funding has demonstrated that the provision of forward-linking infrastructure has the ability to remove costs that would otherwise keep the development from occurring. These projects have the added advantage of also bringing much-needed housing supply to the marketplace.

“Housing affordability is not an issue that is restricted to capital cities. There is no doubt that regional areas have been unable to develop to their potential due to the lack of affordable housing, delivery of linking infrastructure and employment opportunities,” Ms Kakas said.

Peter Verwer, chief executive of the Property Council of Australia, indicated that it was imperative that cities be the focus of the election and welcomed the first major policy announcement which was has been directed to delivering infrastructure to cities.

“We need long-term strategic planning that secures the strong economic growth that will fund sustainable communities that are greener, more vibrant and liveable,” Mr Verwer said.

He called on both parties to provide comprehensive cities policies that join up metropolitan and regional programs during campaign.

“That means moving to better urban planning frameworks, and introducing a national urban planning policy that allows our cities to successfully deliver housing and key infrastructure for our growing population.”

“All parties should be focused on stemming the tide of inefficiencies overtaking our cities, through increased investment in long-term planning and renewed commitment to the delivery of infrastructure.”

The first home buyer market has collapsed on the back of rising interest rates and the removal of the Commonwealth grant for first time buyers.

New First Home Owner Grant data from the Office of State Revenue show that there were just 988 first home buyers in April, down from 2,322 in April of last year.

Real Estate Institute of Western Australia President Alan Bourke said for the month of April the OSR data showed 728 first home buyers purchased an existing home, and 260 decided to build.

This compares with the same time last year when 1,555 bought established homes and 767 built new ones.

“The effects of six interest rate rises and the collapse in first home buyer activity since January is now evident in all market indicators for Perth and Regional WA,” Mr Bourke said.

Mr Bourke said the latest FHOG data for April coupled with reiwa.com sales and listings data confirm the softening trend across many markets.

“While FHOG applications for new dwellings have plummeted to just 260, this is in line with the typical long term level over much of the last ten years. The artificial boom of first time buyers triggered by the Commonwealth grant has now well and truly ended,” Mr Bourke said.

Overall sales data from the reiwa.com website indicates that sales activity fell by 15 per cent in Perth during April, with preliminary data for May suggesting there has been no improvement to this.

“This trend is matched with a steady increase in listings which have risen from 12,700 at the end of March to 13,400 in mid May.

“Of the properties for sale, just under 2,000 were for lots of land. There has also been no movement in the rental vacancy rate which was sitting at 4.1 per cent for the three months to April,” Mr Bourke said.

It is a similar story in Regional WA, with reiwa.com showing sales falling in Mandurah, Bunbury and Geraldton during April.

“Listings have increased in all regional centres, with Mandurah-Murray increasing by 6 per cent over the past six weeks to 1,750 properties.

“Bunbury is also up by 6 per cent to 1,300 properties, and listings in Geraldton-Greenough have risen by 20 per cent to 650 properties,” Mr Bourke said.

Land for sale in these centres remains healthy with 520 listings in Mandurah-Murray and 275 in both Bunbury and Geraldton-Greenough.

The rental vacancy rate in Geraldton-Greenough has increased from 4.8 per cent in the March quarter to 5 per cent in the three months to April, while there has only been a small rise in Mandurah-Murray from 2.6 to 2.7 per cent.

In Bunbury however, the vacancy rate has tightened from 3 to 2.7 per cent based on preliminary data for April.

“All of REIWA’s broad market measures suggest there is little pressure on prices and the housing system in WA is coping well with current population growth,” Mr Bourke said.

Following on from our recent post "Will it be a soft landing or a dull thud?" further evidence about the state of the Perth/WA property market is emerging from the number of listings for sale on aussiehome.com:

- the total number of properties for sale peaked in October 2008 (7,929 were shown for sale on aussiehome.com that week)

- the total number of for sale listings hit a trough in February 2010 (4,428)

- this week we have 5,902 for sale (a rise of 12% off the bottom in 3 months)

- the total number of agencies that were on aussiehome.com during this time has remained fairly constant; with the number of listings per client averaging 41 (it is now at 48)

This 'half cyle' (from one peak to the next trough) measures 16 months in duration, suggesting a full cycle (one peak to another peak, or one trough to another trough) of 32 months (or 2 years 8 months) which is probably shorter than many of us would expect. So are we experiencing a "boomlet" snuffed out by the threat of higher interest rates, or price pressure? Maybe both.

With prices now almost back to what they were at the top of the last boom (December 2007's peak median price for Perth was $465,000; December 2009 data had the median price already back at $453,000), it would appear we have experienced a quick recovery from what was quite a rude shock, and things may go sideways for a while. A return to the 'Normal Market" we were all talking about in mid 2009?

Time will tell, but with interest rates strongly tipped to rise this week due to inflationary pressures, and some homeloaners already feeling the pinch, plus the increased amount of stock around, this could be a great time to buy. (There's always a silver lining.)

Key indicators are now pointing to a slowing Perth real estate market. Whether it's a soft landing or a dull thud is now in the hands of the Reserve Bank.

Here's why. The stock of available listings is up. Substantially. Since the first week of February it's been rising sharply. In the past 10 weeks listings on aussiehom.com have risen by 19%.

Much of this increase is thanks to RBA rhetoric. In their meeting of February 2 they stated clearly: "if econ omic conditions continued to improve as expected, further increases in the cash rate were likely to be necessary." As there was little doubt the economy was improving it appears punters took that to mean that rates were going up. And with the market correction of 08/09 (down around 20%) a fading memory, recession avoided and prices rising again it was time to sell.

Since then stock levels have continued to climb. But in the past few weeks that trend has begun to accelerate. Notably, the number of new properties listed on aussiehome.com in the past week increased substantially by just over 90 percent. That's a significant market shift in anyone's books.

Added to this is a substantial fall in the number of sales reported by aussiehome.com clients. In most weeks we see around 180 sales recorded - last week there were just 25. OK, that's just one week of sample data, but that's a drop of 85 percent!

Granted, these changes are taking place within the context of market corrections resulting from post-GFC oversupply. The first homebuyer's assistance scheme, historically low interest rates and a resources boom have all put intense downward pressure on stock levels.

Too, Aussiehome.com statistics are heavily biased toward Western and near-river suburbs. But the trend of the past 10 weeks, both in the total number of available listings and in the volume of sales, suggests the market is cooling rapidly. It's hard to imagine that this cooling isn't occurring across the wider Perth metropolitan area.

All eyes will now be on the RBA when they meet on May 4. Their words and actions will be key to the Perth real estate market experiencing either a soft landing or a dull thud.

Tenants in metropolitan Perth continue to benefit from stable rental prices as the vacancy rate for properties to let remains well above average.

New data from the Real Estate Institute of Western Australia show that while the vacancy rate in Perth dropped slightly from 4.7 per cent in December to 4.1 per cent in March, the overall median rent remains unchanged at $370 per week.

REIWA President Alan Bourke said the slightly lower vacancy rate was due to diminished stock and not to increased demand by tenants. “What we are witnessing is that many investors who found it hard to sell in the last couple of years put their properties into the rental system to ride out the downturn.

“Now that things have improved, some owners are listing these dwellings for sale which accounts for the increased stock for sale and the lower vacancy rate,” Mr Bourke said. Mr Bourke said this dynamic also helped to explain why rents were stable.

“There is no great demand pressure to cause rent increases and it’s notable that typical rents in Perth have only grown by about $10 per week since the December quarter of 2008,” Mr Bourke said.

REIWA data show that the median rent for a house in Perth is $380 per week, up by a modest $5 on December, while the median rent for units, apartments, villas and townhouses was steady at $350 per week.

Despite no movement in Perth’s overall median rent, some sub-regions did experience rises and falls. REIWA data show that rents increased by 6 per cent in Bayswater-Bassendean (to $350 per week), and by 5.7 per cent in the north west section of Wanneroo ($370).

Conversely, rents fell by around 3 per cent in Gosnells ($330), and the Western Suburbs ($440).

Mr Bourke said that a vacancy rate of 3 per cent was ideal for Perth and provided the right equilibrium between supply and demand.

“The current vacancy rate is therefore about 36 per cent higher than Perth’s long term average, but this can change quickly if jobs pick up strongly on the back of a resurgent resources sector,” Mr Bourke said. In March 2007 the Perth vacancy rate plunged to just 0.8 per cent. 

Source: REIWA, 15 April 2010

Just a short while ago the Reserve Bank raised the official cash rate yet again. It now stands at 4.25%. Sounds scary, but what does it mean for the market in the Western suburbs?

For a no-nonsense point of view I called Adrian Abel of Abel McGrath in Claremont. Adrian’s been around the industry for a long time but he also brings to his market commentary a reality forged by years of work as an auditor for Price Waterhouse.

What Adrian says is thought through and considered. It’s a grounded perspective I value highly.

His first reaction was that the Western suburbs would be affected much less so than less affluent suburbs.

Adrian explained that, while property prices in the Western suburbs were high, that didn’t necessarily equate to higher mortgages. Properties selling for $2 million often have mortgages similar too – or in many cases lower than – those found on properties selling for half the price.

Combine relatively low mortgages with higher levels of disposable income and you have a recipe that sees the majority of Western suburbs home owners having a greater capacity to absorb a rate increase.

He believes that home owners are more likely to defer an overseas holiday than experience any form of mortgage stress.

The lower percentage of investment properties in the Western suburbs also plays a key part in the area’s real estate performance. Adrian said that, whereas investors might be inclined to critically evaluate their returns – and sell as a result – owner occupiers preferred to stay put. As a result the Western suburbs were less likely to experience market volatility caused by sudden over-supply.

So what’s your take on the latest interest rate increase? Was it needed? How will it impact on prices in your suburb? What’s your advice for people contemplating buying?

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]