Interest Rates on Hold – As Expected

As expected the Reserve Bank of Australia has held the official cash rate at 4.75%, so no change to official interest rates.  Glenn Steven’s, the Reserve Banks Governor suggested that Australia’s  inflation rate is within the RBA’s target.

Here’s a good article from today’s Sydney Morning Herald, with the thoughts on future interest rate changes from a range of economists. 

Here’s the link: http://news.smh.com.au/breaking-news-business/rba-leaves-cash-rate-steady-at-475-20110405-1d1tk.html

Most expect no change in rates for the next few months.

Population Growth Slows – but still on track for a Big Australia

Australia’s population growth has slowed dramatically, primarily thanks to the Gillard Governments tightening of regulations which means that for many international students, the option of future permament residency has been taken away.

But at the same time Australian businesses are crying out for more skilled migrants, in particular in our resource sector.

The ABS figures suggest that in the year to September 2010 our net overseas migration fell to 185,800, down from 288,000 in the previous year.

This not withstanding, we are still well on the way to a Big Australia, as it has been termed, with population expected to hit 36 million by 205o.

According to the ABS, an estimated 22,408,000 people were living in Australia in September 2010, up 345,500 people, or 1.6 per cent, on the previous year.

Even with our growth slowing, it is still relatively high and all of these people need to live somewhere.

Rates on hold for 2011?

What will rates do this year, go up, stay on hold, perhaps even drop.  Many economists are now suggesting that they do not expect a rate rise for the rest of 2011 and that is certainly what the futures market is factoring in:

“The collective wisdom of the futures market is that Australia will make it through the next 12 months without another interest rate rise from the Reserve Bank of Australia (RBA)”

With rates on hold and rents on the rise, we expect that the increasing interest from investors in the property market will onlky continue.  From an anecdotal point of view, all of our current projects are selling strongly and interest is growing weekly.

Here’s a link to the full article: http://news.ninemsn.com.au/article.aspx?id=8226869

We’re In For 5 Years Of Strong Growth

According to Bis Shrapnel our economy is in for 5 years of strong growth.  Over the years Bis Shrapnel has been one of the groups that we taken a lot of notice of, their past performance suggests that more often than not they are spot on, or at least close!

“Frank Gelber, chief economist and director of economic consultancy BIS Shrapnel, said Australia was heading into a growth boom driven by investment in the mining sector, a second phase of projects initiated since the global financial crisis following a round of investment before it.”

The concern raised by Gelber is that after another 5 years of strong growth, we may be heading in to a recession unless we make some adjustments now.  Either way, from a property investors point of view, if it’s 5 years of strong growth ahead, now is the time to get in to the market.

Here’s a link to the full article: http://news.ninemsn.com.au/article.aspx?id=8225408 

More Million Dollar Suburbs

The latest RP Data stats show a big increase in million dollar suburbs across the nation.  The number of suburbs with a medium price of $1mil plus has jumped to 212 up from just 78, 5 years ago.

“The number of Australian suburbs with a median home price of A$1 million ($1 million) or more surged 35 percent in 2010, real estate researcher RP Data said, as high-end property prices defied higher interest rates.”

We’ve suggested that we expect a steady growth in 2011 and beyond, for the more medium priced property that we tend to deal in.  RP Data are suggesting a subdued 2011 for the top end of the market.

Here’s a link to the full article: http://www.bloomberg.com/news/2011-03-15/-million-dollar-property-club-surges-35-as-high-end-houses-defy-rates.html

Housing Finance Growing, Investors Are Leading The Way

Home loans have risen for there sixth straight month and according to the analysts it’s above the markets expectation. 

“The housing market certainly seems more resilient than most had anticipated given the move in mortgage rates in November,” said RBC Capital markets economist Michael Turner.

Importantly, loans for construction rose again and loans to investors increased by 3%.

We’ve certainly noticed an increase in investor interest over the last few months, which we would expect will show clearly in the next lot of figures for early 2011.  As is always the case in our property cycle, it’s the savvy investors who are looking to the property market now as they see rents are on the way up and this will in turn push prices up for good medium to long term gains.

Here’s a link to the full article: http://www.smh.com.au/business/housing-finance-grows-faster-than-expected-20110214-1assa.html 

Are Our House Prices Really Overvalued?

The Economist recently released figures suggesting that Australia’s house prices were overvalued to the tune of 56%, in fact the most overvalued housing market in the world!  It’s a big call, especially when you take in to account that the only measure that the Economist uses is the house price relative to rents being achieved in the market.

We think this is a poor measurement and does not take in to account so many other factors such as our incomes, the fact that Australia has such a strong economy, the highest level of GDP per capita in the developed world, strong population growth and a current property undersupply.

It seems the RBA, amongst many others, agree with us:

“Reserve Bank of Australia chief Glenn Stevens says he is not “terribly troubled” about the level of house prices in Australia.

Mr Stevens said the ratio of income to house prices in Australia was “not exceptional by global standards” at a short question and answer session at a business lunch in London.”

Here’s a link to the full article: http://www.smh.com.au/business/rba-boss-not-worried-about-house-prices-20110310-1bofa.html 

Melbourne Property Market Gaining Momentum

As the Melbourne property market gains momentum I thought that this article from our own news service may be of interest.

The growth is expected to continue with the inner city suburbs expected to create high interest and one of the major drivers is the population growth:

“In the city’s local government area (LGA), the resident population increased by 15 per cent between 2006 and 2009. In 2009, metropolitan Melbourne also recorded an annual growth of nearly 93,500, according to a City Research report.”

You can read the full article in our Melbourne Investment Property news section of our main site.

Property Market Update March 2011

For those looking for our thoughts on the market we just posted our latest Property Market update on our website for March 2011. 

We expect to see rents rise this year, which will in turn put further pressure on prices.  We have a very healthy economy, unemployment is low, interest rates are stable and we continue to have a property undersupply.  It’s hard to see property doing anything other than what it has done for the last 100 years, what is changing are our demographics and these will have an influence on which properties make the best investments.

If you would like to read the full article, you can check it out at: Property Market Update March 2011

How Will The Lack of First Home Buyers Effect the Market

There’s been a lot of press of late about the fact that there are less first home buyers in the market.  It’s no surprise, the governments incentives following the GFC bought many first home buyers plans forward and they bought in 2009.  As such, in 2010 and in 2011 there will be far less first home buyers.

But, will this have a dramatic negative effect on the property market as some have suggested.  We don’t think so and neither does Terry Ryder, owner of Hotspotting:

“There’s been a big focus on first-home buyers and a lot of misinformation about how they drive the market … The fact is they don’t,” he said.

Terry makes a few good points, here’s a link to the full article: http://www.smh.com.au/national/first-buyers-not-crucial-20110219-1b0dg.html 

First home buyers account for only 20% of the market.