HTW Month In Review Mar 2015

“Interest-ing! How interest rate cuts drive our real estate” is the theme of this month’s HTW Month in Review

 

– Currently the property market is performing well with steady growth across the board in Melbourne.

– RP Data shows that Melbourne property prices have increased 8.1% over the past 12 months.

– An interest rate fall allows borrowers to feel more confident when borrowing money as their monthly bank repayments would be lower or the amount they borrow could be increased.

– First home buyers would also be encouraged to enter the lower end of the property market and therefore create more demand, which in turn can drive property prices up.

– The lending market would also become more competitive, offering better loan packages as lenders try to attract their share of any increase in borrowing.

– This results in the cost of money becoming cheaper and property values rising.

– The greatest benefit of interest rate cuts will be seen in the lower end of the property market.

– As interest rates are gradually lowered, the Melbourne property market will initially see an increased investment in outer suburban areas of Melbourne such as Craigieburn, Mickleham, Mernda and Doreen.

– These suburbs are at the medium to lower price point value, with a current median sale price of houses in these suburbs of $350,000.

– People living here usually have mid to lower income levels, for example, 19.9% of Craigieburn households earn between $52,000 and $78,000, and would therefore receive more relief or encouragement to borrow when there is an interest rate cut.

– Outer suburbs such as these consist of modern conventional homes that are master planned and mass-produced by large building companies.

– The more people who decide to buy or build a property due to the interest rate cut, the larger the growth of property prices in these suburbs.

– Inner city properties containing higher value properties will be significantly less affected by interest rate cuts.

– The inner suburbs are at the medium to higher price point value with a current median sale price of $1,077,500.

– Generally, those who live closer to the CBD and own their residential dwelling have a higher income, for example, 20.5% of Northcote’s households earn between $78,000 and $130,000 per year.

– With these higher income levels, Parkville and Northcote residents generally own higher value assets such as period or modern dwellings with higher land values.

– As a result, the downward movement of interest rates isn’t going to have as large an effect on these households.

– Cuts to the interest rate would only ensure that consumer confidence remains solid and that properties continue to have steady to moderate growth.

– Many types of investors exist within Melbourne’s property market including property syndicate funds, foreign investment and owners looking to negatively gear.

– All investors receive encouragement from lower interest rates although different categories of investors will be affected to different degrees.

– The RBA lowering the interest rate will boost the already strong number of overseas investors

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Thanks to Therese from Alphabroker

HTW Month In Review Feb 2015

“2015 – the year ahead” is the Theme of this month’s HTW Month in Review..

Opinion on the Melbourne residential market – Here are some highlights:

– There is a generally positive outlook for property market growth in 2015 as the RBA has kept interest rates at 2.5% for 16 months in a row and the inflation rate is 2.3%.

– What this means for investors is that the cost of borrowing money from mortgage lenders is relatively cheap, leading to greater investment and competition in the property market.

– According to RP Data, since the beginning of 2009 Melbourne property values have risen by approximately 45%.

– Growth of approximately 10% in 2013 and strong growth levels in 2014 were recorded according to QBE.

– The QBE Australian Housing Outlook 2014- 2017 states that the high number of new dwellings in the pipeline is likely to tip the market into oversupply from 2015/16, leading to a rise in vacancy rates and progressively weaker property growth.

– According to REIV’s median house price index, September 2014 revealed a $649,000 median price for the city of Melbourne.

– Price growth was impacted by buyer demand especially within Melbourne’s middle suburbs as significant price increases were recorded.

– Coburg has proven to be a suburb of interest for 2015 as purchasers have been priced out of suburbs such as North Fitzroy, Northcote and Thornbury.

– A 16.7% rise for property in Coburg was recorded over 2014 as the median house price soared to $745,000, a $69,000 increase since 2013.

– Doncaster has shown recent improvement as its close proximity to schools, parks, transport and shopping led to solid capital growth of 11.9% over 2014.

– As buyers were priced out of the higher priced suburbs, they sought more affordable options further out, but with infrastructure such as schools and shopping. – Noble Park and Box Hill North have shown an increasing popularity in auction results in recent months as infrastructure plans to improve the appearance and development of these suburbs is strongly encouraged by their local governments.

– The median price for a 3-bedroom detached house in Seaford is $435,000 and $370,000 in Frankston.

– The rental and investment demand is strongly supported by close proximity to public transport and amenities as well as local employment opportunities. – Seaford currently generates an annual growth of 5.89% and a rental yield of 4.06%.

– The annual growth and rental yield for Frankston are 5.2% and 4.5% respectively.

– Both suburbs offer promising future capital growth and rental yield owing to the expected population growth in the City of Frankston, their convenient locations and infrastructure.

– The outlook for the Melbourne property market for 2015 appears positive in the short term, as interest levels are sustainable and encouraging greater investment in the market.

– A weak Australian dollar at US$0.79 encourages a greater level of foreign investment in the property market as the affordability of properties strengthens and interest on loans becomes more sustainable.

– Investors should be conscious of macro market risks such as rising unemployment, sluggish household income growth, affordability issues and cost of living pressures if interest levels fluctuate and population growth doesn’t slow down.

– Modest growth is expected in housing prices, especially for property in prime locations and with a point of difference.

– The outer eastern suburbs are strongly attracting buyers due to their affordability.

 

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Simply jump on the HTW website www.htw.com.au  and follow the prompts.

Housing Market Starts Off Year On Strong Footing

Highlights over the three months to January 2015:

Best performing capital city: Hobart +4.4%

Weakest performing capital city: Darwin -2.6%…

Highest gross rental yields: Darwin houses at 6.0% and Darwin units at 5.9%

Lowest gross rental yields: Melbourne houses at 3.2% and Melbourne units at 4.2%

Most expensive city: Sydney, with a median dwelling price of $723,000

Most affordable city: Hobart, with a median dwelling price of $341,000

Source CoreLogic

HTW Month In Review December 2014

Opinion on Melbourne Residential Market for 2014

 

– The year 2014 has been red hot in the residential sector of Melbourne.

– When comparing median house prices from those of 2013, the results are as expected, jumping a staggering $91,000 in the median housing price, with an annual growth of 16.34% for the year to date (REIV).

– When discussing the hot spots of Melbourne for the current year there is no doubt the inner east takes the cake.

– Using the prestigious suburb of Hawthorn East as an example, the median house price of the suburb is sitting at $1.49 million with only 49% of properties in the area being single residential dwellings (APM).

– The demand is just as high as the prices with 83.3% of properties being cleared at auction.

– Closely following this year was Balwyn North with a medium house price of $1.35 million, an annual increase of 27%, reflecting the competitiveness of the area.

– This area is very popular with the Chinese community with its emphasis on one of the top performing state high schools, Balwyn High.

– Although the inner east has been dominating the residential market this year, there has been major interest in the inner north attracting many developers and investors.

– With the infrastructure surrounding the universities, the area is becoming a hot spot for students and young renters.

– Northcote is the prime example of such a trend, with 38% of people living in the suburb aged between 20 and 39.

– High density areas do however have the potential for supply to be above demand, as seen in Melbourne’s CBD.

– In the outer suburbs such as the outer eastern suburb of Forest Hill, the price of housing is also increasing.

– Forest Hill has also had a phenomenal 87.6% auction clearing rate causing the area to be a hit for both young first home buyers and the older retirees.

– As the Melbourne population increases, so too does the rural urban fringe and such suburbs are becoming further developed and are changing rapidly into higher density areas, with a resulting greater need for infrastructure.

– In the north west of the city, developments are going up left right and centre.

– This area is a massive hot spot for developers as the land is still relatively cheap.

– In Greenvale, the Providence and Orchards and Gardens developments have set the trend.

– This has then spread further into Craigieburn which has seen vast developments by Aston and Stockland.

– Covering masses of land we are seeing a change in the area and the need for more infrastructure will continue.

– One of the major issues on the economic side of property is the inability of first home buyers to afford property or obtain loans.

– Due to Melbourne’s real estate becoming increasingly expensive and somewhat unaffordable, first and young home buyers are being forced to either rent or buy much further out than desired.

– This is an issue that has been highlighted this year with many of the inner city properties being competitively purchased by private investors or developers, causing more money to be brought to auction and thus very much pushing housing prices up.

 

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Thanks to Therese from Alphabroker

HTW Month In Review November 2014

– According to the RP Data Home Value Index, the Melbourne median house price has surged by 9.3 % over the financial year 2013/2014 and 11.7% in the year to August 2014, coming in second after Sydney and proving strong house price growth.

– While major banks claimed there is no bubble in the market, RBA flagged housing risks.

– ABS’s September release stated that loans to property investors in Australia jumped to a record high as a proportion of total home loans, excluding refinancing.

– Baby boomers have been dominating in the investment property market.

– In addition, foreign investors have been very active in the Melbourne residential market.

– Melbourne comprises 34% of the A$17.2 billion worth of foreign investments into Australia’s residential real estate approved by the Foreign Investment Review Board (financial year 2013).

– Demand for housing is predominantly sustained by strong population growth.

– Melbourne’s population is expected to grow almost twofold to 7.7 million by 2051.

– An average 2.1% population growth has been recorded for the past ten years and a 2% per annum growth is forecast for the next three decades.

– Besides overseas migration, interstate migration is a major driver.

– According to ABS, Victoria had the highest number of interstate migrants in the past year.

– New housing, particularly higher density residential developments, is needed to accommodate the increase in population.

– The number of residential dwellings rose by 139,900 throughout the year in Australia and more than half of these were in Victoria (42,400) and New South Wales (31,200).

– However, there is concern over the rental vacancy rate which might rise above market equilibrium if population growth falls short of expectations.

– The financial and professional services industries in Melbourne have continued to grow and are catching up with Sydney.

– However, Melbourne’s GDP growth was the slowest since 2001.

– There is a possibility that Melbourne is undergoing unaddressed structural challenges, particularly as it moves away from its core manufacturing base.

– Employment opportunities in healthcare are anticipated to increase over the next few years with the completion of the Bendigo Hospital and the Northern Hospital precinct in Epping, which leads to a forecast of strong housing demand in these regions.

– On the other hand, manufacturing is considered a sunset industry as car manufacturers such as Toyota, Ford and Holden have decided to quit manufacturing in Australia.

– The closure of car manufacturers will likely have a direct impact on the demand for housing in nearby suburbs such as Altona and Geelong.

– The Victorian unemployment rate was 6.7% in September this year, at its highest since December 2001.

– The outlook for the Melbourne property market remains positive in the short term, although investors should be aware of macro market risks such as rising  unemployment, sluggish household income growth, affordability issues and cost of living pressures.

– As the RBA is anticipated to keep the cash rate constant until mid 2015 and together with the depreciating Australian dollar,  modest growth is expected in housing prices, especially for property in prime locations and with a point of difference.

– The outer eastern suburbs are strongly attracting buyers due to their affordability.

 

If you don’t already, you can subscribe to receive this report directly each month for FREE. Simply jump on the HTW website www.htw.com.au  and follow the prompts.

 

Thanks to Therese from Alphabroker