The State Government has forecast that Perth house prices will fall by about 2.2% but return to steady growth by 2012-2013. “House prices in Perth have been falling since the march quarter 2010 and the number of dwellings sold remain at a very low level, consistent with heightened level of consumer evident over the past year, “ the review states. The 2.2% drop in the house prices will be the increased stock level and financial market is not really stable. Because of the global financial crisis, weak housing market and the loss of consumers’ confidence, these are the reflection in the housing market that many has concluded that house prices will really fall.

Despite on all negative outlooks about the housing market, State Treasurer Mr. Porter said that the government was expecting rising incomes, stronger household balance sheets and population growth to boost house prices in 2012-2013 and beyond.” We will have recovery to house prices if investors and home buyers will enlarge their property portfolio, have possible outlook and the government must come clean about the true costs of key projects for the state. According to the budget review, Perth prices are expected to grow 6% in 2012-2013, 5.8% in 2013-2014 and 5.5% in 2014-2015.


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Based on the Statistical Bureau, Australia Gross Domestic Product (GDP) rose 2.55% in the months till the end of September from the same period a year earlier. Australia’s economy grew more than expected in the third quarter because of the building and mining activity. Aside from that, Analysts expected a gain of 2.1% and the Australian dollar rose slightly, there was also second rate cut and expected the next inflation.

According to Brian Redican from Macquarie, “We see solid growth right through next year, which is diametrically opposite to what the most of the developed world can look forward to.” Analyst expects that Australia’s Economy will be better placed compared to many others. One of the contributors of having good economy is the continuing health of the resource industry and that is the mining industry. The data showed that business contributed 2.5% to GDP growth, engineering construction rose 31% and household consumption grew 1.2%. Therefore, Economy’s growth should continue into next year and the followings years.


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According to Nathan King, a property valuation director at LMW Hegney, “Building a house is possible now almost a luxury in Perth whereas before the global financial crisis it was considered a necessity.” The least expensive suburb was Medina with median price $230,000 and the “rising star” suburb was Martin with 13.9% growth. Past three years before GFC, Perth was producing twice as many houses and green-title lots as strata-titled properties. Whatever the reason, the new trend of Perth now reflects the normal property cycle and it will be the most affordable housing options available.

Nathan King suggests that, WA’s changing demographic, reducing commuting times, well located strata properties and providing in many circumstances a lifestyle on the doorstop. King concludes also that it’s always worth being aware of market trends and even better if you can benefit from them. For investors who can recognize the trend of population and in an investor’s profit, this we considered a trend in order to be desirable as people free up capital. When a suburb has affordable first homes, demand will increase with drive values and it will give a reason to increase the supply if the supply is limited.


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According to the latest Market facts report by the Real Estate Institute of Australia (REIA), “Perth house prices fallen at nearly four times the national rate.” Over September quarter, houses in the Western Australia capital have fallen by 6.3% to be down 8.2%. Reflecting the unstable of the market, homes sales decreasing by 3.9% and the vacancy rate declining by 0.6%. Investors and Home buyers are not the only one struggling in Perth. Over the year, this is the biggest fall of capital cities and Perth rent increased 2.6%, the largest annual increase of all capital cities. The strength of the rental market with falling vacancy and rising rent suggests consumers are renting in preference to buying.

According to REIA President Pamela Bennett, “the quarterly figures indicate the “has softened slightly”. Ms. Bennett anticipates that this will bring positive results to the economy and for the residential property market by improving the level of activity in the market and the level of first home buyers entering the market. I think the market has starting to cop up all the negative results this year in property market and nest year will be the biggest change in the market and we will find out if the softening of the market will continue next year.


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According to FitchRatings Director James Zanest, “Those regions which have shown strong sensitivity to mortgage rates due to socio-economic factors and which were affected most in March 2011 by Christmas spending and increased interest rates have benefited most from stable cash rates,” “As mortgage rates have decreased and the Australian economy and unemployment remain solid, the increased cost of living remains the main variable generally affecting household affordability, he added. The Reserve Bank of Australia cut interest rates in November and December for the first time since November last year and Western Australia recorded a strong improvement because of the rebound in the mining sector. The percentage of loan repayment was more than 30 days overdue, dropped from 1.77% in March to 1.4% at September 30. Queensland remains the worst performing state with 1.7% and Victoria is the best performing state with a rate of 1.04% which is lower than other states. Tourism destinations and mining industries are now the best performing sectors for the improvement of employment and contributed to improve mortgage performances.


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The September quarter figures showed that housing starts fell. Experts have warned that despite of the two consecutive interest cuts this year, construction industry may not see any recovery until late next year. South Australian builders Candetti Constructions was also confirmed that the warning comes as the construction industry continues to suffer.

According to Housing Industry association economist Andrew Harvey, “The data showed a 12.1% annual decline in the number of new house built in the September quarter should be taken in context with the most recent rate cuts.” Mr. Harvey expects and hoping that recovery may be a long way off closer to the end of the next year. Economists also expecting another rate cut in February. Anyhow, the situation comes as the industry continues to suffer the highest insolvency appointments out of any other sector and the Government should focus on this scenario and might focus first the mining sector in which we all know that mining is the saviour of the economy. Housing Industry advocate are calling for external assistance to get the industry moving as they believe that Home Building is essential to having the economy growing again.


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Australian Property Monitors Economist Andrew Wilson expects the tide of turn next year, tipping Perth as the first state to make a comeback in what has been a poor year for the property market nationally. He expects that property values will increase 5-10% next year equal to Brisbane and Darwin in which the said two cities are ahead of the other capital cities in WA. Perth property values shed an average 6% in the year, more that the national average of -4.2%. Property analysts also are predicting that Perth market will begin to rebound next year.

According to Real Estate Institute of WA President David Airey said, “He expects the WA property declines to bottom out within 6 months before a recovery by the middle of 2012. First-home buyers entered the market in which proves that the market has been very strong and it is a good stimulus to upgrade the market.

Head of Property Research at ANZ Bank, Paul Braddick said, “WA’s property bust would bottom out early next year at a $420,000, followed by a “quite strong” recovery.” As we observed, WA has starting to recover and mining sector employees and aspirational home-buyers coming-out to the market, this could well prove that the market has starting to flatten. If there will be higher wages, the stock markets will be recovering, the house price will be increasing, the investments will be improving, so therefore, there will be a confidence to expects that the City will be recovering.


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Perth is now returning to growth after three years of declining markets. Brisbane and Perth are the weakest city markets this year but the weakest cities are expected changed ins tatus to the strongest city markets next year.The two cities namely Perth and Brisbane have much in common, both are seeing growing airport to traffic from fly-in-fly-out workers. Both cities are boosted by emerging resources boom and have CBD office vacancies contract and for industrial property grow. They are both seeing improving sales volumes and rising rents for residential property. In Brisbane City, the number of house sales is 13% but the median house price reduced 2%. The vacancy rate in Brisbane city is 2.3%, while Logan city is 1.8%. The REIQ says, the state’s tourism centers of the gold, sunshine and Fraser coasts, as well as Cairus, are sill experiencing oversuply of stock.

According to Andrew Wilson, Economist for Australian Property Monitors, says, ” Perth has the potential to go on one of its notorious price benders next year. I wouldn’t be surprised to see double-digit price growth in Perth in 2012.” Perth is already the capital int he office, industrial and hotel markets. One indicator is data on fly-in-fly-out workers passing through Perth Airport. Perth Residential Property will follow in 2012.


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According to the research by Bankwest 38% of all home approvals over the  past year were for medium-density housing, up from 31% five years ago.” This research shows that medium density housing, townhouse, units, and semi-detached homes are increasing especially capital cities. The report was based of ABS statistical subdivisions, compared to five years ago, there is an increase in the share of medium density housing in more than 2/3 of the 204 local areas.

According to Chief Executive Bankwest Retail, Vittoria Shortt, “Affordability and tight rental markets had shifted the focus of Australians to higher-density living”. With the rental market tightening across the country and significant rental increases, medium density housing is starting to look more and more attractive, she added. The trend towads units and townhouses is increasing on capital cities and Perth bucks the medium density trend and the only state capital where the share of medium density approvals has not increased. But still Perth is still recovering and maybe next year the housing stability will be flattened.


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According to Australian Bureau of Statistics (ABS), “housing finance figures for October 2011 show in trend terms that following half a year of consecutive decreases, the number of finance commitments increased marginally for the sixth consecutive month; the October increase was 0.7%.” The housing commitments increase to 17.9% in October compared to 16.4% in September, as a percentage of the number of first home buyers. First home buyers contributed an increase of 23% in Victoria and 17% in New South Wales and Queensland. It shows that house prices will weakened and investor housing finance was unchanged.

According to David Cannington at ANZ Research, “While both the investor and upgrader segments are on a softening trend, first home buyers are showing a fledgling recovery. Weakening house prices and lower mortgage rates (with the November and December rate cuts still to provide a positive impact to housing finance) have improved housing affordability to a point that is encouraging first home buyer activity.” In trend terms, the value of the investment housing commitments was flat and the figures shows that first home buyers are returning to the market. Many people expect that there will be continues increase in housing finance.


Tags: ABS, housing

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First home buyers have been
hiding these past years because of the unstable status of property market.
Based on the early results released home buyers are back in the market to help
the initials signs of market recovery. It shows that the oversupply of homes
may lessen and we are moving now in the right direction towards market
boosting.

According to REIWA President
David Airey explains, “First home buyers activity has been very strong, the
level of discounting by buyers has flattened out and rental yields for investors
to improve.” The estimated 28% of sales activity is very important because it
was from the homebuyers. They key factors to increase homebuyers in the market
are plenty of stocks, falling house prices and stable interest rate. REIWA expects
that stringer signs of economy will emerge by nest year and the supply and
demand reach a better balance.


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According to acting
President of Real estate Institute of Australia (REIA) Pam Bennet, “Based on
the data between June 2001-2006, rental affordability didn’t change at all,
while the proportion of income required to make home loan repayments increased
8.1% over the same period. However over the past 5 years, the proportion of
income required to meet rent payments has grown by 3%, whilst the proportion to
meet home loan repayments has only grown 1.4%.” It shows that year 2011 is a bit of challenging year in residential property market because the
rental market has maintained it's affordability in comparison to home purchase.
Statistics from the REIA shows that renting is a more affordable option than buying;
rental affordability has declined at a faster rate in the past 5 years than
affordability of buying a home. If the residential purchasing market becomes
less affordable more people choose to rent rather than to buy because rental
market is unstable. Maybe if the demand of rental properties increases, there
is possibility that rental prices may increase.




Consumers have been forced to break with the Big Four Banks, in which the Four Banks remained in silence for having possibility on pre-Christmas Interest Rate Cut. The Reserve Bank’s decision to cut interest rates by .25% before Christmas has vanished because of the Four Banks who refused to pass on cuts to customers. Among the Four Banks, only ANZ announced it will pass on the full rate cut to customers.

RBA Treasurer Wayne Swan called on the Big Four Banks to cut their rates in line with the RBA: “For this rate cut to have the desired effect, the big banks need to come to the party. Failing to pass on this rate cut would be economically irresponsible.” He added, “They are among the most profitable banks in the world, I think that is understood very clearly by their customers and if their customers are unhappy with the behavior of their bank they can go down the road and get a better deal.” A decision not to pass on 25% cut to the official cash rate will cost homeowners with an average $300,000 mortgage and most people still face hefty penalties for walking away. Smaller bank and credit unions have passed the savings on to customers but why the Big Four Banks stand-off the Interest Cut rate? Are they really wary of global Instability?


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According to Treasurer Wayne Swan says the most important thing is for interest rate cuts “cuts to be passed on promptly.” Last November, the big four banks namely ANZ, NAB, Commonwealth and Westpac ended 25-basis-point cut. Among four banks, ANZ was the first to announce that they will slice their standard variable mortgage rates after the Reserve Bank cut the official cash rate. ANZ was the first to move, saying it would pass on the full 25-basis point reduction from December 16, taking its standard variable rate to 7.3%.

According to ANZ Australian Chief Executive Philip Chronican said, “ the banks retail margins were contracting as funding costs increased in the last six months, and these cost were now largely unrelated to movements in the official cash rate.” Interest cur-rates really help for the Australians, it would mean a lower income and hopefully it will cut this month because it would make for a better Christmas. Small business customers will also get relief because of the announcement of ANZ Interest rate from 25 basis points to 7.30% from December 16. However, ANZ also indicated that in future it will set its retail interest rates and will have potential for a rise as early January.


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Based on the latest ABS figures show that GDP, in generally adjusted volume terms, grew 1.0% in the September quarter 2011, after a revised increase of 1.4% in the June quarter. The GDP growth indicates 2.7% increase in the terms of trade and the Real gross domestic income grew 1.6% for the quarter. The Australian Bureau of statistics reported that on an annual measure, the economy expanded by 2.5%.

According to Treasurer Wayne Swan, “Slower growth would mean less government revenue but the government remained determined to bring the budget back to surplus in 2012/2013 as planned.” He also expects the economy will still be growing at trend in the current financial year when he hands down Treasury’s latest economic forecasts with the mid-year budget review. Stable monetary exchange and the cuts rates last November and also having cut rates next year will be sign that economy still solid and grow better. Most sectors are struggling or going backwards by mining investment remains the backbone of growth. Among the states, WA led on the way of State final demand and the final demanded jumped by 8.4%, contributing 1.1% points of the 2.1% increase in National final demand. Investors has nothing to worry about what they are invested because next year and the following years, the economy will become stronger and will become more stable economy.




According to our most recent
Matusik snapshot (Matusik Snapshot 499-House Price update)- Australian housing
is becoming quite affordable again falling end prices, coupled with falling
interest rates and rising household incomes, have now made housing across
Australian – and especially in Queensland, Western Australia, South Australia and
Tasmanian-much more affordable.” There are two ways to track valuations:
price-to-rent ratio and price price-to-earnings ratio and there are 53%
overvalued relative to rental return and 38% overvalued relative to income. In contrast to Matusik's positive viewpoint, the
Economist says, “more vulnerable to accredit crunch, higher mortgage rates or a
recession which drives up unemployment and could send house price tumbling.

House prices are starting to
get the point where people will start buying again. Anyhow, a house price
depends on the economy of the country. Australia’s economy grew faster than the
last quarter this year on consumer spending especially the mining driven
investment and it will have interest rates cuts soon next year. Treasurer Wayne
Swan said in a statement, “the strong investment outcomes are further evidence
of the massive pipeline of planned investment in Australia.


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The RP Data researcher says,” All
these factors combined suggest that housing market conditions, at least at a
macro level, are likely to remain relatively subdued until we see and
significant reduction in the number of homes available for sale.” In some in
which the average selling time is high, it indicates that demand for available
home is low, and available housing supply may be high, we can say that vendors
expecting higher prices compared to buyer price expectations. Based on the
researcher of RP Data, across the combined capital cities there is 50.8 months
of supply and the national level is 7.4 months and new listings are 18.6% total
listings are 26.4%. After staggering for past years, Perth and Western Australia’s
lower numbers of homes for sale may be beginning recover and home owners for
sale hope to have contract tied up before Christmas.


Tags: house prices

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With constraints remaining
on new supply, and demand from tenant increasing, rental levels are starting to
increase. This activity has stabilized with outlook continuing stable with
prices will have modest rise. Propell National Values shows that rental level
in Perth have increased on $5/m2 on the 2nd quarter this year and capital
values have firmed by about $100/m2 and are $1,100 to $2,400 for small units,
and $850 to $1,700 for larger warehouse.

According to ANZ Head of
Property Research Paul Braddick said, “There were both good and bad elements to
Australia’s struggling property market especially in the embattled Western Australian
market. The bad news du jour was the uncertainty surrounding the future of the
Eurozone economies.” Mr. Braddick is a firm believer in overall fundamental’s
strength, more massive population growth expectations for Australian combined
with significant housing shortfalls predicted for the coming years. He also
suggested that the Reserve Bank of Australia (RBA) will cut interest rates
again. Satterly Property Group called on the RBA to quickly cut 50 basis
points, or ½% and Spruinking Land Sales, also called for another 50 basis point
cut in February and hope the RBA will heed all the advices from them to further
50-100 basis points off cash rate in the 6 months between February and August
next year. Hopefully, next year Perth Property Market will hit the bottom by March
and Perth will boom and become stable in order to reach the median price soon.


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JP Morgan forecasted that the Reserve Bank will cut interest rates next month due to “material” deterioration in financial markets since the last board meeting. JP Morgan added that Australia’s central bank will cut interest rates in the country to 4.25% from 4.50% this coming December. 25 basis points cut interest rates that RBA have, it’s the first interest cut for more than two years because of the Melbourne Cup Day.

According to JP Morgan economist Stephen Walters, “The RBA boards showed its hand on Cup Day by choosing to case policy owing mainly to escalating global concerns our assessment is that officials will stick to this script in the near term, given that conditions in financial markets have deteriorated materially.” Starting December continuously next year, there could be deeper cuts in 2012 and forecasted that there will have twice cut interest rates next to 3.75%. The Reserve Bank has not been alone in cutting interest, some countries influenced the RBA to make the decision but among the economist who attended the meeting, they exactly focused the neutral level for the Reserve Bank’s benchmark 4 and 4.5 %.


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According to Westpac chief Economists Bill Evans, “there will be a sequence of rate cuts beginning with 25 basis points in December 2011 and through 2012 totalling 100 basis points prior to a period of steady rates in 2013. Reserve Bank will cut interest rate four times in 2012, predicted by Westpac. Based by RP Data survey, home prices have dropped 2.7% in the first five months of 2011 and I believe that if the interest rate will fall, the property market will become active again next year. It shows that when the economy is strong and interest rates are rising, the confidence in the property market is usually highest. Investors and agents have already planned, improving their skills and strategies to make the property market will active again. The bottom line is what does really will happen in 2012?


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