National Property Market Overview

MARKET REVIEW

Unfortunately for most property investors the impact of overseas economies and the ongoing lack of buyer confidence have translated into a softening of real estate prices.

The Australian Housing Market remains relatively soft even with the recent duel cuts to interest rates in November and December 2011. Its performance and stability in 2011 have been resilient as opposed to the extreme volatility of the Australian Sharemarket.

Capital city home values declined by -0.2% in October 2011 prior to the RBA’s decision to cut interest rates. The decline in capital city home values in 2011 stands at 4.0% on a seasonally adjusted basis, according to RP Data. If we add in gross rental income, total housing returns are up 0.9% 2011 YTD, which is a reasonable result considering 2011 has been plagued by many global economic uncertainties (e.g. debt crisis in Italy, euro currency stability, rising unemployment in the US, $AUS fluctuation impacting import/export markets).

With fixed and variable home loan rates falling in recent months, freeing up more disposable household income, Australian investors are benefiting from a very welcome boost in overall housing affordability.

Houses

In October 2011, Sydney and Canberra have been more resilient compared to other capital cities, where houses produced relatively flat capital growth in October 2011 (0% and 1.6%). The other capital cities did not come off so favourable with Brisbane reporting a negative capital growth rate of -1.6% during the same period, along with a decline in its median house price which is now at $402,000 (down 10% from $420,000 in July 2011).

Melbourne experienced it’s peak performance in the midst of 2009-2010 with capital growth between 25-30%, however, the Melbourne property market has corrected itself in 2011 to return -5.8% with a median house price of $458,500 (down 10% from $475,000 in July 2011).

While housing values have dropped, rental markets still remain relatively strong across the board in all capital cities, with very little movement up or down being identified.

We are still experiencing deterioration in housing values at the premium end of the market with large falls in house values, obvious over the past 10months. Rental yield results still remain strong for houses at 4.3% with no movement since July 2011, with the stand out performer in October 2011 being Darwin at 5.3%.

The level of demand for new dwellings remains high in the Sydney market, with more than 124,000 dwellings required (namely in the South West) over the five years to 2016 according to BTS Properties.