Property Investment
Property Newsletter August 2011
August 9, 2011 | 
Author There is a lot happening in the Perth property market that all investors should be aware of so I thought it would be an opportune time to let you know exactly what is happening and how you may be affected.
Prices – rising, falling or some of both?
It’s very easy to get caught up in a “one size fits all” approach to property investing. A lot of the headlines you see in newspapers and on television reflect what is happening nationally. The Australian property market is really a collection of thousands of sub markets across the country. While some of the major cities are suffering an inevitable slowdown after periods of solid growth (e.g. Melbourne), other cities, such as Perth are moving into an upturn as the mining boom Mark 2 takes off.
Even within a city there are varying submarkets. In Perth for example, you may hear that the market is oversupplied. That is generally true in some areas. We see that the outer fringes are still significantly oversupplied with excess stock built in the last boom, meaning prices have dropped or have stagnated for a long period of time. At the same time, in the areas we have identified for strong growth over the next few years, we have seen more competition for properties, meaning prices are still holding, and we expect them to rise first as we enter the next market upturn.
Where is the market heading in the next 12 months?
The Perth property market has historically lagged behind the major cities on the east coast by a few years. In 2001 – 2003 Sydney and Melbourne boomed while Perth grew at much lower rates. Once the boom in those cities ended, investors turned their attention to the Perth property market and Perth had a property boom from 2004 – 2007. Since 2007, the Perth market has been generally flat on average, whereas Sydney has performed well and Melbourne has had substantial growth. Both of those markets are now cooling.
We expect the trend to continue and see Perth as the outperformer while other cities have their slowdown. While we won’t see any significant headline capital growth in the market as a whole due to the oversupply in some areas, we will see good quality properties in great locations return some reasonable capital growth over the next 12 months.
Where is the market heading in the next 3 to 10 years?
The outlook for Perth is very strong over the next 3 to 10 years. With the strong growth in the resources market, meaning more jobs and more income, it is inevitable that Perth property prices will be strong. Recently, other respected economic forecasters have predicted the Perth property market will generate the highest capital growth over the next 3 years and 10 years also.
Is obtaining finance becoming easier?
There is no doubt that finance is harder to obtain than it was in the periods before the GFC. Many lenders tightened their lending criteria once the GFC hit and the introduction of responsible lending and National Consumer Credit laws has seen further changes. However in recent months, lenders have begun to loosen up and credit is definitely easier to obtain than it was two years ago, albeit not anywhere near as easy as it was before the GFC.
The tightening of credit may have impacted some borrowers, however for the vast majority, finance is still readily available. The restriction on credit in a counter-intuitive way has actually been a benefit to property investors. While it has restricted some investors purchasing property, by far the greater impact has been on property developers. Significant levels of presales are now required and this has meant that new stock is harder to bring to market. This has restricted the supply of properties, meaning that any excess supply will be soaked up more quickly. It also means that when the excess supply is taken up, that new supply will not be readily available, causing a rise in prices.
Rents are on the way up!
The last boom in Perth from 2004 – 2007 was not only a boom in property prices, but also a boom in rental prices. Rental prices have not moved significantly over the last few years. The vacancy rate was approximately 1% in 2007 before increasing to as high as 4.7% in 2010. Over the last 12 months the rental vacancy rate has declined significantly to be just over 3%. A balanced market is considered to be around a 3% vacancy rate, so we are seeing a return to a normal market. Just as the supply of properties for sale varies significantly by suburb, so does the vacancy rates per suburb. Our analysis indicates that some suburbs in Perth have vacancy rates of around 1% whereas others have vacancy rates as high as 9%.
Consequently we are seeing rental growth in a number of the suburbs where we manage property. The ability to increase rents is still selective and tenants are price sensitive, but we do expect the next few years to see rental returns increasing, which is great news for property investors.
Market Summary
After a period of underperformance, it certainly looks like a very promising period ahead for the Perth property market. With over $200 billion dollars of resource investment in Western Australia either in construction or planned, there will be significant flow on effects to the rest of the economy and hence property prices. We expect Perth to be the outperforming market over the next 1, 3 and 10 years in Australia, as the mining boom Mark 2 gets into full swing.
If you are seriously looking to build wealth through property then I suggest you contact me as soon as possible. By the time you read in the paper or hear on the news that the Perth market has returned to strong growth, you will have missed a reasonable amount of the market upturn and subsequent capital growth. We are already seeing savvy investors adding to their portfolios as they see the upturn coming, and some smart first time investors also taking advantage of the opportunities in the market.
This Newsletter has been kindly provided by www.MomentumWealth.com.au, if you would like to discuss any matters arising from this newsletter or are interested in property investment or development, then call Mark Casey, a client of Mercia, on markc@momentumwealth.com.au or call Momentum Wealth on 9221 6399.
Posted in 
Property Newsletter July 2011
Weekly Property Pulse Professional Edition
This week’s edition covers:
Industry Market Wrap
Regional markets feeling the pinch
Population growth back at 2005 levels
Wayville office building sold
Industry Market Wrap
The Reserve Bank (RBA) released the minutes of their monthly board meeting for June at which they decided to keep official interest rates unchanged at 4.75%. The most relative insights for the property sector were: ‘Households had continued to be cautious in their spending and borrowing behaviour. With household income growth strong in the March quarter and consumption increasing more moderately, the household saving ratio was estimated to have risen. Members observed that the saving ratio was now back to levels seen in the mid 1980s and that the increase from earlier unsustainably low levels was a positive development. Consistent with ongoing consumer caution, the housing market had remained soft. Average dwelling prices had fallen modestly so far in 2011, with the weakness mostly in more expensive suburbs and in cities (notably Perth and Brisbane) that had seen a faster run-up in housing prices in earlier years. Housing credit growth had slowed and housing loan approvals had fallen in the first three months of the year, although preliminary numbers for April showed an increase.’
Regional markets feeling the pinch
Following on from last week’s Pulse where we analysed where capital city housing markets had recorded price declines from their peak, this week we take a look at regional markets.
Regional property markets have, for the most part, been recording much lower levels of capital gains than capital city markets since late 2007 as the GFC began to impact the global economy. According to the RP Data-Rismark Home Value Index results for April 2011, the housing markets outside of the capital cities have recorded a 1.8% fall in house values during the year to April 2011.
Population growth back at 2005 levels
The Australian Bureau of Statistics (ABS) released the quarterly Demographic Statistics update for December 2010 this week which tracks changes in population. Over the 12 months to December 2010, Australia’s population increased by 1.5 percent, its slowest rate of population growth since the 12 months to December 2005. Despite the lower rate of growth, Australia’s population still increased by more than 325,000 persons over the 12 months. Although the number is well below the 467,000 new residents over the 12 months to December 2008, it is still strong number nonetheless (running 2.3% above the decade average).
Read the full article at blog.rpdata.com…
Wayville office building sold
An office building in Wayville, South Australia has been sold with vacant possession by agents of Colliers International.
The property at 45 Greenhill Road, Wayville, was purchased by a private group.
Colliers International agents, Ian Thomas and Alistair Mackie, marketed the property, which achieved a final selling price of $4.61 million.
Located on the southern side of Greenhill Road, the two-storey commercial office building of approximately 1275 sqm is situated on a site of approximately 1486 sqm with lower ground and undercroft parking for 52 cars.
“45 Greenhill Road is one of the more prominent buildings in Adelaide’s Fringe precinct and provided an opportunity for investors and owner occupiers to capitalise on the low vacancy rate and one of Australia’s best performing office precincts,” said Mr Thomas.
“Historically very few Fringe investment opportunities come to the market; it is tightly held and as a precinct consistently performs above its weight with good rental and capital growth.
“The enquiry level received during the campaign was strong and we spoke with a number of buyers who have been waiting for an opportunity such as this to be released.”
Stay up-to-date with the latest commercial property news all in one place. Subscribe to the Australian Property Review, powered by RP Data for only $1.90 a week and receive a weekly newsletter that includes Auction Results, Deals of the Week, Retail News, Leasing Deals and an Industry Market Update. Click here to find out more information.
Property Newsletter May 2011
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
Property Investment April 2011
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
Property Investment March 2011
|
|||||||||
|
|||||||||
|
|||||||||
|
|||||||||
|
|||||||||
|
|||||||||
|
The property at 187 Bay Street, Port Melbourne, was sold with a new lease in place to The Noodle Box at an auction attended by more than 100 people.