AS NSW recorded its lowest figures for construction of new homes, developers have predicted the worst is over and the state is on the verge of a housing boom.
Bureau of Statistics data for the three months to March showed the number of new housing starts has fallen to 5400, down from 7500 in the same period last year and 11,000 five years ago.
However, the housing industry believes this week's budget will help deliver a long-awaited turnaround. "There will be a boom," said Stephen Albin, chief executive of the Urban Development Institute of Australia.
The acting head of the NSW division of the Property Council of Australia, Angus Nardi, agreed the budget announcement of a 50 per cent cut in stamp duty for the next six months on all new homes up to a value of $600,000 along with several other measures would see a dramatic change. "I think the Government has implemented a handful of measures that should bring about a boom in the residential market," he said.
The Treasurer, Eric Roozendaal, signalled yesterday the Government may open further areas for development in measures to revive building activity.
"I suspect there will be further announcements about opening up other areas," he said when asked whether additional measures were likely to boost housing construction.
Budget estimates from the Department of Planning confirm the Government is expecting a boom.
The upswing is most pronounced in the greater Sydney area with a 41 per cent increase in the number of homes built in the next 12 months.
The department estimates that 25,000 dwellings will be built next year, many of them apartment blocks in and around transport routes and in existing residential areas.
A senior economist with BIS Shrapnel, Jason Anderson, said the cut in stamp duty and other factors made an increase in housing construction levels certain but questioned whether it would be as big as the Government has forecast.
"I would be surprised if you got a response of that magnitude from a cut [in stamp duty] for six months," he said.
He expected investors would begin entering agreements to buy apartments off the plan enabling developers to secure funding for these projects.
Publication: ninemsn Date: 18 June, 2009 Author: Matthew Moore and Brian Robins
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AUSTRALIAN house prices will rise by nearly 20 per cent over the next three years, buoyed by the "current heat" in the market surrounding first home buyers.
That’s the forecast from research house BIS Shrapnel’s Residential Property Prospects report - based on data from the Real Estate Institute - released today.
BIS Shrapnel’s Angie Zigomanis said activity in the lower end of the market - buoyed by the boost to the first home owners grant and low interest rates - were generating “green shoots” of recovery.
The report says average house prices in most capital cities will grow by between 11 and 19 per cent over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.
Mr Zigomanis, who said actual prices were more indicative than prices adjusted for inflation, predicts the boost to the first home owners grant combined with low interest rates would kick start further activity in the “upgrading” market.
“If the first home buyers are in the market buying, someone is selling it to them,” he said.
“We’re expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property,” he said.
Mr Zigomanis said once the (boost to the) first home owners grant expires, and first home buyers drop back out of the market, there’s enough activity in the market so it becomes self-sustaining.
The boost to the first home owners grant will finish at the end of this year.
Unemployment curbing property growth
But the research, based on Real Estate Institute data, said house prices would remain relatively stagnant until unemployment peaked around June 2010.
“Everything’s pointed at people jumping in the market”.
“At the moment we’re dealing with a confidence issue,” he said.
Weak economic growth and rising unemployment meant Australians were hesitant to jump into the market, he said.
The Government forecast in its May Budget that unemployment will rise to 8.5 per cent by mid-2011, leaving one million Australians out of work.
BIS Shrapnel predicts unemployment to peak “somewhere between 7 and 8 per cent” mid next year.
Mr Zigomanis said unemployment would impact house prices “more so from a confidence perspective”.
“Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook,” he said.
Outlook via region, according to BIS Shrapnel
Sydney
- Median house price $530,000 in June 2009
- New home construction at 50-year lows
- Total price growth forecast at 19 per cent to 2012
- Strongest growth at end of three year period
Melbourne
- Median house price $425,000 in June 2009-06-12
- A fall of 6 per cent for the financial year
- Pick up in “upgrader” activity expected
- Nearly 20 per cent increase in prices to 2012
Brisbane
- Median house price $391,000 in June 2009
- Down 7 per cent for financial year
- Interstate migration to boost modest price growth
- House prices to rise by 16 per cent to 2012
Publication: www.news.com.au Date: 15 June 2009
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Signs are building that investment in property is set to bounce back after a year in the doldrums, according to a news story by Robert Harley in The Weekend Australian Financial Review.
Quoting prominent experts and organisations, the report said the country's one million or so investors were now re-examining the essentials of property, and discovering they have 'rarely looked better.'
It added:
- Rising rents and falling interest rates have boosted returns
- Values have remained 'remarkably' stable
- The risk of house price falls is lessening and
- Decreases in superannuation concessional thresholds will push people on higher taxable incomes towards more deductible investments such as property.
RP Data national research director Tim Lawless reportedly said rental increases of the last two years had provided investors with their best gross rental yields for a long time.
BIS Shrapnel managing director Robert Mellor said he expected investors to be back into property markets from late 2009.
The Westpac-Melbourne Institute consumer confidence index found that more than 65% of consumers expected house prices to stabilise or rise in the next month.
Australian Property Monitors' Matthew Bell reportedly said there would still be upward pressure on rents because demand is high and vacancies are at historic lows.
The story quoted Macquarie Research as saying housing had always been the sector that led Australian out of recession, with large mortgage rate falls the trigger.
This time appeared to be no different, it added.
Publication: The Australian Weekly Financial Review Date: May 30-31, 2009 Author: Robert Harley
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Fiddling with our super has made saving for old age a lot more risky.
Get rid of the kids, pay off the mortgage, start piling money into super – that used to be how it was done. Well, thanks to recent developments, those days are over.
We’ve had barely eight weeks’ notice but when it ticks over to the new financial year on July 1, the amount you can contribute pre-tax each year to super will halve overnight – from $50,000 to $25,000. You might be thinking half your luck to have even $25,000 to put into super.
However, this so-called concessional contributions limit will include whatever your employer pays. Which means if they contribute $10,000, you can only add an additional $15,000.
Again, what’s the fuss? Simply, the new cap renders useless the time-honoured strategy of throwing all your money at securing a comfortable retirement after you’ve discharged your other responsibilities.
Let’s take someone with $100,000 in super, whose employer contributes $10,000 a year and who wants to retire on $35,000 a year at age 67 (the new retirement age).
Modelling by Strategy Steps shows that today you could reach your target if you first dealt with the children and mortgage and then started salary sacrificing the maximum $40,000 a year at age 50.
Once the allowable additional amount drops to just $15,000 however, you’ll have to start a full 10 years earlier – at 40.
Alternatively, you would need to supplement your salary sacrifice from age 50 with an annual after-tax contribution of $19,000. The limits here remain unchanged at $150,000 a year, or $450,000 averaged over three, but the loss of tax concessions means in our scenario a 41.5 per cent taxpayer would fork out an extra $7,500 a year.
Another, probably even less appealing option is to delay retirement to age 72. Such will be the situation when transitional arrangements allowing the over 50's to contribute more – also halving on July 1 from $100,000 to $50,000 – end in 2012.
The changes have been billed as a crackdown on generous tax concessions for the rich. And yes, you would have to earn close to $300,000 for your employer’s required contribution to approach the new limit. But the reality of our system is that people on far less rely on the spare capacity offered by the existing limits to direct all the money they can into super in their last few years of work – when finally they can.
Not only do the new rules reduce significantly the practical effectiveness of super, they also highlight that when you place all your bets on this government condoned retirement vehicle, you take on legislative risk. First there’s the wide-ranging super review scheduled to report back in June 2010; second there’s the risk that successive governments faced with a budget black hole will pare back benefits further.
So what else can you do? Negative gearing into either property or the sharemarket just became a whole lot more attractive. With tax deductions available on investment losses, this is a tax effective supplementary strategy.
And don’t forget your own personal tax haven: the family home. You could spend money on renovations to improve its value and then downsize to realise the tax-free gains on retirement.
Stick just with super and not only will you have to start putting money in before it is perhaps feasible, you also might have to wait longer to get it out. Oh, and you’ll probably still have a house fill of kids.
Publication: The Sun-Herald Date: May 31, 2009 Author: Nicole Pedersen-McKinnon.
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The big news in property from the May budget was the extension and gradual phasing out of the first-home owner boost, which took some heat out of any rush to buy first homes before June 30. Many commentators now are focusing on how rises in unemployment may affect house prices.
The theory goes that when people lose jobs, they cannot pay mortgages, foreclosures rise and forced house sales occur. Wider unemployment means less demand because potential buyers’ income disappears. But what happened in practice?
The Federal Government has forecast unemployment to rise to 8.5 per cent in 2010, which is close to the forecasts of the big banks and economic forecasters.
To gauge the impact on house prices, let’s look at the last recession.
Between March 1990 and June 1991 GDP fell by 1.7 per cent across the country and unemployment hit 9.4 per cent in April 1991. Over the same period, house prices nationally rose by 1.7 per cent.
Unemployment peaks after periods of falling GDP and this recession was no different. Unemployment peaked at 10.9 per cent in December 1992 and exceeded 10 per cent in 1992 and 1993.
So how did house prices perform in 1992 and 1993? Nationalyl they rose by 3.3 per cent with performance varying between the capitals. In NSW unemployment hit 11 per cent, but Sydney house prices rose by 2.3 per cent. In Melbourne house prices fell by 1 per cent and in Brisbane they rose by more than 8 per cent.
So high unemployment has not caused widespread falls in property prices in the past. If households spend a higher proportion of income on mortgages compared with 20 years ago, rising unemployment might have a stronger impact on prices. The Reserve Bank says mortgage interest as a proportion of disposable income rose from 6 per cent in 1991 to nearly 12 per cent last June. With mortgage rates halved, this is heading back below 8 per cent. So we’re not really paying a higher share of income on mortgages than we were in the early 90's.
Many households kept up mortgage payments when rates started falling, to build up a buffer. A government initiative with the major banks will postpone mortgage payments for up to a year for those who lose their jobs.
Unless unemployment exceeds forecasts, it’s hard to see it having a significant effect on house prices nationally.
Publication: The Sun-Herald Date: May 31, 2009 Author: Matthew Bell
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