Sydney

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Melbourne

If you ask most real estate agents how was 2011, they will tell you it was an average year for business as sales volumes were down approximately 20% – 30% across Melbourne. This is an indication that vendors in the most liveable city of the world felt, that selling in 2011 – would mean selling at a discount by comparison to 2010 levels. Surprisingly the reduction in sale volumes had a mild stimulating effect on one pocket of the market being, quality property – as few high quality properties hit the market pace demand was high for this market segment and price marginally rose. For the rest of the housing stock however there was a slight reduction in prices and property took on average nearly twice as long to sell.

People talk about the clearance rates as being the number one indicator of the market place – but it’s easy to forget that auctions are only being conducted on a sub section of the market place.  The average days on market is the most comprehensive way to gauge the state of the market. Towards the end of 2011 property was sitting on the market on average 50 days and towards the end of 2012 property was sitting on the market on average 90 days. This effectively means there were fewer buyers in the market place, and those buyers were taking a lot longer to see eye to eye with vendors.

The REIV has vacancy rates at 2%. where as, SQM research has vacancy rates at 4.4% – the reality is properties are getting harder to rent – this is largely due to the slight over supply of property that is beginning to haunt Melbourne property investors and owner occupiers who over extended themselves in 2010 – we feel that rents will flat line this year and with yields already low, it appears prices might have to fall in the short term to lure investors back into the market.

So what can we expect for the year ahead – well, in my opinion a very similar year to 2011 – I think it will take the average property 2 months to sell, I feel that there will be very similar transaction volumes – and if there are no rate reductions this year or god forbid a rate rise: then there is the real possibility of further slight falls within the market place.

As indicated in my December 2012 on the ground, Melbourne is going through a correctional phase at the moment. This is a normal pattern in any real estate cycle and the market will recover as we have solid long term growth fundamentals. If you are going to invest in Melbourne, stock selection and a sound strategy is critical. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other parts of Australia where your investment may have a better opportunity for short term growth.

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Brisbane

2012 will likely be a mixed bag for residential property in QLD. Brisbane, having received the ignoble title for the worst performing capital city of 2011, is believed to be showing signs of recovery. This is a welcome sign for both prospective buyers as well as owners in a state that was ravaged by natural disasters and bad sentiment for much of 2011. So far 2012 has given a small glimpse into the upside that is possible coming off a low base.

Many buyers have come to the realisation that they will have to meet the market if a sale is to be achieved and there are indeed some great opportunities to buy in selective areas.

The gold Cost and Tweed area is still on the nose and is best avoided until signs of recovery  are within coo-ee. Regional hot spots such as Gladstone have received their fair share of press and despite high yields there is a premium attached to entering these type of markets.

As usual Capital 360 is well placed to service the QLD market and with eyes firmly on Brisbane we anticipate it to be an exciting year ahead!

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Perth

Many have billed 2012 as a big year for property in the West. The strength of the resource industry is maintaining continual positive net migration (with strong wages) and this invariably has a positive correlation with rising rents and property prices.

With the unemployment rate steady at 4.3% (over a full per cent more than the national average!) the strong economy will be firmly behind the rejuvenation to be expected in the residential property space.

While still too early to tell when and where any recovery will occur, history states that with the falling rate in developer activity it is most likely to occur in established metropolitan regions away from the urban fringe.

There are ample opportunities in the property market provided you get the right advice on where to invest so speak with a Property Strategist from Capital 360 today.

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Adelaide

Soft and sombre is the mood for 2012 in Adelaide. Transaction numbers will be low and prices are tipped to decline. For those souls brave enough to consider buying in Adelaide focus on areas where infrastructure spending is anticipated although this is no guarantee to safeguard against shrinking capital. For investment opportunities we recommend looking toward other states where at least property is on much firmer ground.

There are ample opportunities in the property market provided you get the right advice on where to invest so speak with a Property Strategist from Capital 360 today.

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Interesting times in the Sydney market, indeed. Despite the expected agent hype around the “super Saturday” – traditionally one of the most active weekends for buyers and vendors in the Sydney resi market – the Sydney market did little to inspire. Clearance rates were at a relatively flat 52% (across 641 scheduled auctions). Capital 360’s observations point to a lingering disparity between vendors’ expectation and buyers’ keen desire to press on price and snag a bargain.

As expected, market activity has been buoyed by a late rush by first home buyers – keen to beat the forthcoming cessation of stamp duty concessions.

Despite this, in the lead up to the recent rate cuts, market sentiment appears to have been flagging and in a fairly fragile state. Andrew Wilson, Chief Economist at Australian Property Monitors, points to the prospect of a European credit crisis as being a contributing factor to the downward pressure on local house prices and market activity.

The latest RP Data-Rismark Home Value Index indicates that capital city values slid 0.5% in seasonally-adjusted terms over October, while the 10 months prior saw dwelling vales decline 4%. Sydney and Canberra were the most resilient markets, showing flat to positive growth over October (0% and 1.6%, respectively).

RP Data research director Tim Lawless notes that the lower, more affordable segment of the resi market has endured current market conditions comparatively better than their premium-priced counterparts. Certainly, with a combination of falling interest rates and some more attractively priced properties in the lower-mid range segment, we’re observing that the lower priced market segment appears to be responding to improvement in affordability faster than the upper end.

“The combination of lower interest rates, cheaper homes, and rising incomes is generating a welcome boost to housing affordability, particularly in those markets where value falls have been more significant,” Lawless said

ON the rental front, the recent Labor Party proposal to cap rents in Australia has thrown the cat amongst the pigeons with a prompt response from the REIA, saying it would be disastrous for rental affordability and the property market. The proposal has two aims in both monitoring rising rents in the private rental market whilst identifying mechanisms through which affordability can be maintained through rent capping legislation.

Meanwhile, vacancy rates across key Sydney inner-ring suburbs are still hovering at a super tight 1%, which is tough news for tenants. Investors, on the other hand, should take this as welcome news. On a wider scale, vacancy rates remain relatively higher, ranging up to 8%+. Again, Capital 360’s caveat for investors is to do your homework and avoid the mistake of adding sluggish investment assets to your portfolios.

The Capital 360 buying team are always on the lookout for good buying opportunities – both pre and post-Christmas – as vendors are keen to lock in sales and create some certainty for their next steps into 2012. As a prospective investor having your finance approved and deposit in hand will put you in good stead for some great buying opportunities into 2012.

Why spend too much time worrying about tomorrow when you’ll miss the opportunities you have today?

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Is the Melbourne market in an undersupply like some experts are still predicting? The answer is there are pockets of Melbourne that are in oversupply and more pockets are likely to appear as we move further into 2012. This is evidenced by the amount of stock which is currently for sale according to Louis Christopher of SQM research there are approximately 52,000 properties for sale – which is double the long term average. Furthermore, the low clearance is compounding this issue and stock just keeps building.

According to Charter Keck Cramer we have moved from a general undersupply of property in 2008 to an oversupply which is not set to reach its peak until mid 2013. The reason why developers and governments have let this happen is the record population growth of 2008 and 2009 has not been sustained and now there are too many properties and not enough buyers.

The increasing stock levels is also having an affect on vacancy rates with the REIV indicating that they have moved to 3.1% – this is the first time they have been above 3% since 2006.

Vacancy rates above 3% give renters the upper hand in the market place and means rents will not rise in the short term and in the oversupplied areas rents are likely to come back slightly.

This is not good short term news for investor – but this will start to open up some opportunities by way of distressed property by mid next year. The interest rate cut today is positive news for the market however unless stock is reduced and/or rents start rising, there is little hope of any positive market movement in the short term.

Melbourne is going through a correctional phase at the moment and this is likely to continue well into 2012, if not beyond. This is a normal pattern in any real estate cycle and the market will recover as we have solid long term growth fundamentals. If you are going to invest in Melbourne, stock selection and a sound strategy is critical. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other parts of Australia where your investment may have a better opportunity for short term growth.

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Similar to the Perth market, the bottom is near… Brisbane has experienced the largest median house price decline of any capital city down 8% to $402,000 according to RP Data, continuing the decline which began almost 18months ago in June 2010. We are also experiencing the same downward trend in the median unit price as well.

Capital 360 believes that the Brisbane property market is still impacted by a continuous oversupply of properties versus buyers (stop levels are increasing where buyers are decreasing). Combined with low expectations for capital growth and tighter financial constraints, the situation in Brisbane is improving, however, and consumer confidence is beginning to return to the property market.

Auction clearance rates have been steadily declining in recent months with the latest weekly result sitting at 25% with 24 properties scheduled and only 6 sales recorded with 6 withdrawn. This represents a total value of just over $2m in property value.

Rental incomes from houses and units have remained relatively stable and are almost on par with each other representing an average $390 per week and $380 per week, respectively.  Rental yields should remain at a modest 4.5%-5.5% over the short tem with minimal impact on property values. With limited government reinvest predicted in 2012, Capital 360s view of Brisbane remains optimistic in spit of little stimulus activity to promote capital growth in the long term. Opportunities will continue to come from distressed sales and off market transactions.

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The Perth market has been steadily declining for a number of years, however, recent indicators are predicting that this could change in the coming quarters as Perth approaches the ‘bottom of the market’ and is now preparing itself for growth in 2012. Perth’s median house price continues to fall at $443,000 down 5% since September 2011 according to RP Data.

Unemployment has increased slightly, but not by any alarming margin and migration to the state is very strong in comparison to other states and territories, which is the best indicator for real population growth.

Property sales and listing numbers are increasing and first home buyers are becoming active in the market. Investors are still holding back somewhat, but that is expected to change as more evidence points to growth early in the new year.

However, Capital 360 believes all the signs and indicators are there for future opportunities – rental rates have been climbing slightly since June 2011 (experience flat growth leading up to), sitting at $380 per week for 3 bedroom house rents (up total 5.5% year to date) and $360 per week for 2 bedroom units (also up 5.8% year to date). Vacancy rates have fallen slightly by 0.9%, down from 1.2% in the June quarter and yields for houses are around 4.5% while units yield returns are 5.1%, respectively. We are also experiencing a surge in first home buyer purchases accounting for 17.4% of all investor purchases up more than 4% in June 2011. With the recent interest rate cut in early November, Capital 360 expects this buying trend to continue in the first quarter of 2012, especially in light of another rate cut of 0.25% recorded on Tuesday 6 December 2011.

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The Adelaide rental market has remained sluggish in the lead up to summer indicating that the Adelaide property market is still patchy with the statewide vacancy rate recorded at 3.21%. A general trend emerging in the Adelaide market is that we are currently experiencing a rental market that is more closely aligned to the sales market. When sales trend downwards, rentals are up and vice-versa, but currently, we are experiencing a slower economy, so vendors are holding tight and waiting to see what happens over the first quarter of 2012. Vacancy rates are up to 7% in the Riverland region and 3.4% in North Adelaide, according to REISA.

In terms of these high level results, Adelaide’s median house price according to RP Data/Rismark continues to drop in value to more than 5.5% during the past year to $387,000. The fall in values is in line with results throughout Australia, where median house prices across the country’s capital cities were down 4.7% over the past year.

However on a more positive not, Adelaide continues to experience consistency in terms of auction clearance rates with another 37% recorded in the last week of November 2011. Auction clearance rates for the last week of November were significantly stronger helping the November month close out on a high with 130 auctions scheduled (up from 89 recorded auctions in the previous week), 26 reported sold and 46 passed in recording a total value of $5.9m, respectively. These figures don’t take into account activity following November’s interest rate cut, which Capital 360 believe will generate better results in the first quarter of 2012.

According to REISA, higher yields in the vicinity of 4%-4.5% can still be found in Adelaide’s metropolitan areas where purchases can be as little as $250,000 and in these areas, rental yields have remained relatively stable. The average rental for houses is now $310, up from $300 in the September quarter. We believe there is real opportunity out there now, especially as property prices have softened in recent months, so now is the time to start thinking about investing.

According to RP Data, Adelaide suburbs represent 28% of the total number of national suburbs where the median house price is below $300,000. Capital 360 believes this represents significant opportunities for property investors in other states looking for lower entry points into residential real estate investing.

With both fixed and variable interest rates on the decline, Capital 360 expect to see an improve in housing affordability, which will also have a flow on affect in terms of quality property listings and housing valuations in the new year, especially in Adelaide.

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Sydney

As a whole the Sydney (auction) market is tracking very similarly to last year. Despite a larger number of properties at auction, compared to this time last year, the clearance rates remain almost identical (56% now vs. 58% for same time last year). We’re observing that the volume of listings hitting the market during the traditional peak selling season hasn’t hit the heights that were widely hoped for by agents and buyers alike. Somewhat disappointing for buyers as tighter stock supply naturally means diminished options and increased competition – particularly on choice stock.

Market confidence appears to be on the up with a November Westpac-Melbourne Institute survey reporting a 6.3% boost in consumer confidence – welcome news to all. That, plus an almost instant response from the market, following the recent rate cut, bodes well for the local residential market. The November rate cut was a welcome news for property owners and prospective purchasers. While this rate reduction will be more likely to encourage property owners to pay down their current debt we anticipate that with the likelihood of further rate cuts investors and owner occupiers will return to the market in significant volume.

On a price point level, the upper end of the market remains extremely soft –with the $2.5m+ price bracket seeing some excellent buying opportunities for cashed up home buyers. With the lack of supply/demand tension, homebuyers are benefitting from the lack of competition and are able to negotiate price and terms far more easily than their counterparts in lower, more competitive price brackets. In the more competitive $500,000 – $1,000,000 range investors and home buyers are both extremely active but are being extremely choosy in the properties that they pursue, that is, good properties are selling well but properties with some faults are sitting on the market longer.

On the rental front investors are slowly being drawn back to the market with the allure of rising yields. The rental yields in middle and inner ring suburbs in particular continue to steadily climb while vacancy rates are tight and falling: an excellent sign of impending market recovery. In fact the rising rents and low vacancy rates are proving an alarming topic for the situation of rental housing in the city. The increasing cost of living and shortage of rental properties across the board should be of concern at a government level. On the ground rents have jumped considerably and a greater number of tenants are competing for rental properties.

The sense of market ambivalence has recently given way to a spike in enquiry and buyer activity – amongst homebuyers and investors alike, Capital 360 is encouraged by the increase in buyer confidence although, we expect that the timeframe for sentiment to transition into action will likely occur early next year. As we know property investment is cyclical and the patterns emerging at the moment (stagnating prices, falling interest rates and rising rents) indicate we are at the bottom of the market. In other words this is as soft as it is going to get before prices start rising again.

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Melbourne

Despite the recent interest rate cut on Melbourne cup day the local market continues to struggle.

In April 2010 the market in Melbourne was arguably at its peak, there was approximately 20,000 properties for sale in the metro area and the clearance rate was floating around 80%. Since then clearance rates have been deteriorating and the number of properties for sale has been increasing steadily.

According to SQM Research there is now more than 51,000 properties for sale meaning that we are without questions in a buyers market. In real terms this means there are pockets of Melbourne right now that are oversupplied and values are in decline  – generally speaking these pockets are where significant construction has taken place in the past 24 months, predominately the house and land areas of Melbourne. Some inner areas are also at risk with a large volume of apartments due for completion within the next 12 – 24 months – approximately 15,000 in total.

Furthermore the Melbourne metropolitan vacancy rate has increased from 2.6 % to 3% – giving little hope that we will see any rent increases in the short term.  The next 6 months will see some real opportunistic buying as pockets of the market will get hit hard in this short term downturn.

If you are going to invest in Melbourne, stock selection and a sound strategy is critical. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other parts of Australia where your investment may have a better opportunity for short term growth.

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Brisbane

The Brisbane real estate market is definitely gaining positive momentum. Over the last two years there has been very little development or property construction in the Brisbane market, over which time rents have remained fairly flat.  As the population influx north (into Brisbane and surrounds) continues we will continue to see rents increase over the short term. So, as the population in Brisbane continues to rise and development activity remains low (suggesting a long-term shortage of available investment grade properties) we anticipate rents will underpin a healthy increase in capital growth throughout inner and middle ring suburbs.

The highest level of interest in the market has been for units and townhouses in the sub $500,000-$525,000 price range. The median value of houses in Brisbane currently stands at $438,000 with 10 year capital growth p.a. of 9.49%. The year ending September 2011 saw property values in Brisbane down by 4.05% (but up by 1.4% on the previous months results) which indicates a slight recovery in terms of housing values in Brisbane in the short term leading up to Christmas.

Stock levels have not increased and this has helped encourage prospective buyers to begin scouring the market for the more premium properties in the hope of securing a good price before the market begins its anticipated growth phase.  A indicator of this activity may be evident in the slowdown in the rate of discounting with advertised properties achieving close to their advertised list price.

Auction clearance rates within Brisbane remain extremely low (the lowest of any capital city excluding Darwin) however this is expected to change and the increase in Auction clearance rates for Brisbane will be a very good early indication of market recovery.

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Perth

Perth’s median house price is on track for a record sixth consecutive quarterly decline, with the majority of home owners reluctant to sell in a poor market, which is now causing a drop in property listings. What we are now experiencing is a large number of sellers taking their properties off the market rather than stock being diminished through sales. This reaction is causing some considerable supply and demand tension for the Perth property market.

However, we believe the Perth roller-coaster real estate market could be heading for a significant revival in 2012 after a four-year long slump in prices. Leading analysts are tipping a return to growth within the first quarter of 2012 on the back of high rents, stalling interest rates and weak building activity as well as the states planned business investments.

While property prices have fallen between 6-7% on average over the past 12 months, rents have risen by 8% over the same period – resulting in improved yields.  Improved yields attract gun-shy investors and are frequently observed prior to a market rebound due to their ability to stabilise prices.

Our Research Committee believes that the slow leak will come to an end by early next year and we believe Perth will represent good value and provide solid growth for the next 3-4 years.

Auction clearance rates for Perth for the week ending October 2011 were 30.8% with only 13 reported auctions with only one sold at auction while three more were sold prior. We are working with many local clients to restore buyer confidence, which continues to remain flat as well as clients from our interstate offices to get their strategy sorted and their finance in place so that our buyers agents can swiftly take advantage of buying opportunities as they present themselves in the Perth market.

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Adelaide

Adelaide is currently rated as Australia’s second most affordable mainland capital city (after Brisbane). With a median house price of $432,299 for the September Quarter. While this is regarded as relatively affordable by national standards many market pundits believe that this figure is likely to fall further, having already slipped -2.7% in the last 12 months according to RP Data. Weak market conditions are also evident in the increased number of properties on the market as well as the increased days on market for both houses and units. Houses are currently requiring 50 days to sell and units 48, both up about 20% from the same time last year. Capital 360 is of the belief that Adelaide will continue to experience a decline in property values over the short-term and has some way to go before market consolidation occurs and buying opportunities present themselves to coincide with a return of capital growth.

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Sydney

With the spring selling season well and truly upon us, capital360 is tracking some particularly interesting market activity – with some great buying opportunities in blue-chip Sydney suburbs. Despite uncertainty in both the local and worldwide financial markets, the local property market is moving along very well. In all price brackets there is strong activity from both home buyers and investors. With the slight air of uncertainty, prices – rather than buyer interest – have been subdued, meaning that some investment grade properties are being snapped up for great value. In Sydney’s Inner-West and Eastern suburbs stock levels remain almost identical to Spring 2010 – contrary to media reports – albeit with slightly lower clearance rates. There appears to be more properties listed for sale via private treaty than auction with increasing evidence of pre-auction negotiation opportunities as well as “discount-to-market” opportunities.

With the imminent end of the First Home Owners Grant (ending for the category of ‘existing properties’ on the 1st of January 2012) there is a significant amount of activity from buyers keen to purchase now and capitalise on the governments cash hand out and stamp duty concessions before it is too late. As a direct result many properties in the sub $600k range are experiencing a spike in activity. When the grant finishes, we anticipate that a temporary vacuum will exist in this market segment so it may well be wise to get your finance in place and deposit ready for some good buying opportunities in early 2012.

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Melbourne

The Melbourne clearance rate has been in the 50% for the 5th month in a row and the resulting glut of properties for sale is one of the key risks affecting the metropolitan market. Melbourne stock levels now sit at approximately 50,000 according to Louis Christopher of SQM research, basically double the amount of stock that usually sits on the market at any one time. Obviously the excessive stock is having a negative impact on values, but certain market segments of Melbourne continue to perform well. Generally speaking a ‘two speed’ market can be identified with the outer areas of Melbourne oversupplied and in decline, with certain blue chip pockets of Melbourne steady & arguably slightly rising.

A key warning sign for certain blue chip areas however, is yields for investment grade apartments are beginning to fall below 4% and this is very low by comparison to other capital cities. Compounding this is the fact that the inner metro market will also be affected by large volumes apartments, being completed within the next 12 – 24 months – approximately 15,000 in total.

On the positive front vacancy rates are stable and rents are set to strengthen over the next 6 months. Whilst opportunities still exist, stock selection in the Melbourne market is absolutely critical. Currently we are encouraging those investor who are looking for short-term rapid capital growth to consider areas outside metro Melbourne.

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Brisbane

As Spring has arrived and the temperatures rise, the heat of the Brisbane market has also increased.

August saw a month where interest levels were slightly higher than the rest of the year and September has seen this trend continue.  This is not to say that there is a peak in prices, but the activity in the market is getting stronger.

The highest level of interest in the market has been for units and townhouses in the sub 550k price point.  Stock levels have not seen much of an increase and this has resulted in people starting to make the move on the quality properties.  This has resulted in some properties achieving close to, or slightly above, listing price.

The housing market is still relatively quiet however there has been a slight increase in investor activity.  The gross rental returns for units and townhouses are close to and in most cases, slightly over, 5% whereas for housing up to 800k, the yields are closer to 4.5%.  These are strong returns, and with depreciation on top of this, prices can’t be held at bay for too much longer.

Development sites are few and far between resulting in those that do hit the market disappearing quite quickly.  Good quality properties in general that come onto the market are still being snapped up very quickly and as confidence grows in the marketplace, it is safe to say that this trend should continue.

With rental prices increasing all year and interest rates being on hold, the market is presenting some great value to investors, however as times are not getting harder for owners there is not as much stock on the market.  Limited stock and higher demand combined can only point the market in one direction… up.

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Perth

Perth was the weakest housing market with negative growth recorded in all time periods. Over five-years Perth house values fell at an annual rate of -0.8% and have fallen 4.6% in the most recent year. Finally Perth units were the weakest of all capital cities returning only 1.3% growth over five-years and falling 6.6% in the last year in line with Brisbane houses which fell by 6.7% in the same period.

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Sydney

With the recent “rates on hold” RBA announcement, coupled with the slashing of the First home buyers stamp duty in last week’s NSW budget, it will be interesting to see the roll-on effect in the current Spring market. We expect there’ll be a heightened sense of fervour in the market as first home owners rush to beat the January 1, 2012 deadline. 

According to the CBA July 2011 quarter update, First home buyer (FHB) activity fell in July with the number of loans falling by 4.9%. The FHB market share hovered at 15.2% in July, compared to 15.9% same time last year. 

Capital 360 expects that the likely fallout in the short term is that we’ll see a spike in market activity, and subsequent FHB market share, pushing clearance rates northwards. With pent up demand, as result of the winter downturn, and, spurred on by the announcement, we’ll likely see subsequent false market “heat” in the lower price points through to Christmas with an expected Post-Christmas FHB hangover. 

The cuts are expected to push FHB’s further out of Sydney, to areas where median house prices are lower and, no doubt, we expect heightened frustration amongst would-be homeowners who will see the dream of property ownership seem more mirage-like than ever. 

On a national front, loan approvals for July were up across the board when compared with the same period in 2010. NSW was up 8.2%, VIC 5.4%, WA 16%, ACT 8.1%, NT 2.2%, TAS 2%. QLD recorded the only figure lower than July 2010, with approvals down by 4.9%. 

Media reports consistently paint a bleak picture for Sydney-wide auction clearance rates, which for the past seven to eight weeks have been hovering around 54.8% with a total of 356 properties listed for auction. These generalised figures fail to take into account key idiosyncrasies between regions/areas/suburbs and, even at a street-by-street level. They belie the fact that the better performing pockets within key middle and inner ring suburbs – currently on Capital 360’s radar – are consistently achieving 86%+ clearance, with days on market (from “for sale” to “sold”) averaging approx. 34-36 days. 

Effective comparative analysis between two adjoining suburbs may identify numerous points of differentiation that will shed light on clearance rate variation, thus making it a more meaningful exercise for objective data analysis on the part of the would-be investor. 

The message here is that it is as important as ever to be judicious in your property selection and negotiation process as the market shows continued “Two speed” tell-tale signs. Better properties in key performing areas are attracting solid interest, activity and subsequent returns for the smart investor, whilst the non-investment grade properties in comparatively poorer performing areas are continuing to pass in at auction and languish on the market, unsold. 

Vacancy rates across key Sydney inner-ring suburbs are as low as a super tight 1%, representing dismal news for tenants, but welcome signs for savvy investors. Elsewhere, vacancy rates are significantly higher, ranging up to 8%+. This disparity further evidences the need for investors to conduct sound due-diligence on any prospective residential investment opportunities so as to avoid the disastrous outcome of inadvertently adding sluggish investment assets to your portfolios. 

According to the Australian Property Monitors, the July quarter Sydney house median price has crept up marginally to $639,484 . Despite Sydney now being the most expensive city for houses, it is expected that it will continue to outperform on the basis of the divergent paths of increased desirability and continued housing undersupply. 

In summary, Capital 360 sees excellent buying opportunities, identified through extensive qualitative research and analysis, in the current market as increased “spring selling period” stock levels occur. Beware the discounted “bargain” as increasingly frustrated vendors seek to offload poor performing assets. Enter into the acquisition process with “The end in mind” i.e. Consider your exit strategy when buying by looking for key attributes and performance criteria that will not only attract and retain a high calibre of tenancy, but will have equal appeal to subsequent purchasers, on the basis of intrinsic aesthetic appeal, demonstrated return and capital growth, should the decision be made to divest the asset at a later date. 

Capital 360 is ever vigilant for excellent buying opportunities on behalf of our registered clients

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Melbourne

Many commentators have been suggesting that the Melbourne market is on the brink of collapse? Well I think the answer to that question is Melbourne itself is not one market and general market statements in the media are misleading and confusing buyers. There are two alarming market statistics floating around at the moment and they are: increasing vacancy rates and the high number of properties for sale in the Melbourne metro area. Both of these two issues, once you dig deeper suggest that the problem is in isolated to the outer areas of Melbourne.  

If we look at the last 3 years, on average there has been around 25,000 properties for sale at any one time. In February this year there were approximately 33,000 properties for sale in metro Melbourne, since then total stock has been increasing at approximately 7% per month and now there is approximately 45,000 properties for sale. Furthermore this time last year there was around 30,000 properties for sale, which means there is 50% more stock for potential buyer to choose from.

The real concern however is the markets in the outer areas of Melbourne where stock has actually doubled – taking the lion’s share of the increase in stock levels. As a consequence properties in the outer suburbs of Melbourne are sitting on the market longer and vendors have had to reduce their expectations in order to sell.  In other pockets of Metropolitan Melbourne such as the inner East & inner North where only marginal increases in stock levels have been experienced, the market has maintained a healthy level with prices stabilising and the majority of property selling at auction or shortly there-after.

With less property transacting theoretically there should be more renters in the market place which should be putting  downward pressure on vacancy rates. Interesting, market analysis is showing that this is not correct, with the REIV indicating that the current vacancy rates are rising.  In the inner areas of Melbourne the vacancy rate is 2.7% which is the highest it’s been for 12 months and looking beyond 4kms from the CBD we see a spike in the vacancy rate being 3.4%.  What does this mean? It means that for the moment less people are prepared to rent – potential renters are opting to staying home longer or taking alternate options like share house arrangements rather than face the rental market alone – this can also be attributed to the reduced net migration figures. 

It’s generally acknowledged within the industry once vacancy rates are above 3% the rental market contracts and weekly rents start to fall. Whilst the rise in vacancy rates may be partly attributed to the winter months which are traditionally quieter, we have been witnessing first hand: subdued enquiry and prolonged rental vacancies. With Spring on our door step and the onset of some decent weather we anticipate that this should pick up slightly however landlords out there should remain wary and ensure that they are advertising at market value with their rent or risk extended periods of vacancy in this market.

Moving forward what can we expect? – Well, I think the otter areas of Melbourne are in for a tough time and its likely you will see median prices fall in a number of suburbs. The inner areas of Melbourne should continue to be stable throughout 2010 unless rents increase or interest rates decrease, at which point we may see slight increases in values. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other part of Australia where your investment may have a better opportunity for short to medium term growth.  

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Brisbane

During the month of August, Brisbane has seen some stabilisation in the market with buyers starting to come out of the woodworks.  With interest rates not changing but some of the big banks lowering their fixed interest rates, it appears the confidence has returned to some extent. 

The month of August saw a higher conversion rate for auctions of approximately 5% and a number of properties that had been on the market for a long period of time have now sold. The levels of stock hitting the market is quite low and there is starting to be a shortage of quality properties for sale.  

August also saw the buyers competing for quality property. On 4 separate properties that Capital 360 made offers on during the month of August, there were multiple offers of between 2 and 5 parties looking to purchase. Capital 360 missed out on 4 of these opportunities as the prices were above what we were prepared to pay for our clients. 

Brand new property sales in Brisbane increased dramatically in August with the introduction of the Queensland Government’s Building Boost of $10,000. In one particular property that Capital 360 has considered for clients, of the 30 in the complex prior to August 1 there were 3 sales. As of September 6 there had been 21 sales as people have obviously jumped at the opportunity to get $10,000 from the Government to contribute towards their loans. 

Overall August has shown some positive signs in the Brisbane residential property market and we will monitor the performance and activity closely in the coming months. The increase of buyer activity and the reduction of properties on the market could be the start of some movement in the Brisbane property market. 

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Perth

Perth residential properties have been among the weakest performers of the nation’s state capitals over the last few years. According to Residex, Perth houses have shed 0.4% in value in the five-year period to 31 July 2011 with units increasing in value only 1.5% per annum in the same period.

Low consumer confidence has resulted in a slump in home sales figures not seen since the midst of the Global Financial Crisis of 2008. However, when assessed over the longer term, the weakness of the last few years could be viewed as a natural correction with the market expected to recover on the back of the latest mining boom.

Over the past ten years, Perth property values, on average, have grown in value by 11% per annum placing the city’s property market among the most resilient of all state capitals. For example, over the last ten years there was a 3-year period of consistent growth beginning in 2001 up until 2004. Between 2005 and 2007 saw a sharp rise in property values followed by a period of consolidation more recently.

As value begins to emerge following a rather protracted period of correction and as a result of the expected continuation of the mining boom, should see increased investment activity and a return to growth in early 2012.

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Sydney

Historically, the Winter months have proven slow in Sydney’s real estate calendar. Nonetheless, quality properties in proven investment locations continue to sell strongly with clearance rates in some areas hovering at a healthy 86% level. Capital 360 notes that good properties remain outside the influence of negative market sentiment and remain hotly contested while inferior properties are sitting on the market for longer. Nationwide, the property market has experienced slight falls in median value with Sydney being the only capital city to have recorded growth, albeit a modest increase of 0.1%, in the most recent quarterly results making the median house price for the city $644,658. The citywide auction clearance rates for the month reflect results typical of the rainy, winter months. Despite a strong clearance rate of 64% for the weekend of the 21st of July, Auction clearance rates settled back to the low 50% range by the end of the month.

As a direct response to lack lustre auction campaigns, Capital 360 is noting that many vendors, whose properties sit in traditional auction-strongholds such as the Inner-West and Eastern suburbs, are bucking the trend and listing their properties for sale via private treaty. This might be further evidenced via the 276 properties listed for auction on the 23rd of July, versus the 322 for the same weekend last year, despite there being approximately 15% fewer properties in total on the market. Midway through August auction clearance rates pushed past 60%; perhaps indicating prices are on the ascent once again.

Within our key target areas; middle and inner ring suburbs (up to 12km from the CBD), we are noticing a high level of competition for investment grade properties that have been listed for sale or auction while sub-standard properties are being marketed as “bargains”. This means that investors, who are looking to enter the market at the moment, must be especially judicious in the property selection process. In contrast to boom times, where there was an apparent indiscriminate “can’t miss out” approach by many buyers, cooler markets see a dramatic reduction in interest from buyers surrounding sub-standard properties. Capital 360 is ever mindful of purchasing an asset that will offer maximum liquidity; in both strong and weaker markets. This entails showing a high level of awareness for market preferences which, in turn, helps ensure low vacancies, good rental income and capital growth. While prices are softer and there is frequently more room for negotiation, beware of properties that are presented as ‘bargains’. It is essential to remember that something is normally a bargain for good reason – most often because no one else wants it.

With good quality stock and clearance rates starting to track upwards again Capital 360 will be paying close attention to the market so as to provide quality information to our clients looking to either augment their investment property portfolios or source their family homes at the best possible price. That said, Capital 360 views the current market as being one in which good buying opportunities are available for the discerning investor.

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Melbourne

Looking at the raw stats in Melbourne you could be forgiven for being confused. The REIV just released the June 2011 quarter median price movements: indicating that Melbourne house prices rose by 5.4% over the last 3 months – this is despite sluggish clearance rates and stock levels being unusually. Interestingly, the 12 months median movement shows a similar increase of 5.7%, in real terms what this means is property prices dipped in the first quarter of the year and have now recovered to the median value levels we saw towards the end of 2010.

Whilst incoming stock is approximately 20% down from 2010 levels, SQM Research’s indicates there is 42,000 properties for sale in metro Melbourne Vs 32,000 properties for the same time last year. The build-up of stock resulting from low clearance rates should be having a negative impact on the market however median value changes tell us a different story.

There is no question however, that the inner areas of the Melbourne market have strengthened – this is a combination of people thinking it’s an opportunist time to buy, a prolonged period of poor stock quality & greater optimism surrounding interest rate reductions. In the inner areas of Melbourne our internal data shows an approximate clearance rate of 75% against a Melbourne metro average of approximately 55. What’s more, we are seeing multiple bidder’s again, notably in Richmond with a number of auctions hosting 5+ bidders with properties selling under the hammer, well above reserve.

The biggest issue for Melbourne investors at the moment, as eluded to earlier is the prolonged period of average to poor stock quality. This is resulting in a high concentrated of demand for good quality properties which may be artificially inflating values in certain instances. Vacancy rates & yields remained steady, however we feel rentals will strengthen throughout the course of 2011. We are getting some solid results locally for our clients & whilst we are still positive about the Melbourne market, we are currently advising those who want to aggressively grow their portfolio’s to consider Sydney & Brisbane as they are likely to produce better returns over the short term. It this market it pays to get unbiased advise to ensure you get the returns you deserve.

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Brisbane

Now that tax time has passed and people have decided to get back out into the Sunshine, the activity in the market has started to pick up. Nothing drastic has happened in the market and isn’t expected to within the next few months, however there is definitely more interest.

July sparked a small rush for properties for home buyers trying to buy a property prior to the 1st August before the Stamp Duty increased to investor levels. This saw a slight peak in property values up to $500,000. The remainder of the market has continued to be relatively subdued.

Auction clearance rates are continuing to stay low around 20% however rental yields are seeing a slight increase. Properties up to the value of $600,000 are returning 5-5.5% gross rental returns. Some of the properties Capital 360 has purchased for clients in the past 2 months are returning in excess of 6%. This is an outstanding result for residential property.

Overall the month of July has not seen any big changes. The bottom of the cycle seems to have hit and it is now just a matter of time before the curve starts to trend upwards.

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Perth

One of the key principals that I have always believed in when making any investment decision revolves around replacement value of an asset. People think this notion is important so that we insure the property correctly however this should always be a driving factor in your purchase decision.

A decade ago I was involved in a group that purchased around 40 properties in Thornlie and Huntingdale to the east of Perth. At that stage you could purchase a 3 bedroom 2 bathroom house on a large 700 square metre block for under $120,000. The reason we targeted these areas in such volume was simple – the replacement value of land and house was far greater than the purchase price. It was clear that the areas were undervalued and 6 months later the prices jumped 15-20%. A tidy profit was made.

At the end of the March quarter In Perth the medium house price has dropped 5% to $480,000 in the last year. In the same time the price of an average block has increased 5% to $257,000. The cost of putting a standard home on a block fitted out (including gardens) would be around $200,000. By the time you add all other costs such as stamp duty, interest costs etc. you can see the replacement value of a standard home is now around $480,000-$500,000.

So we have a place now in WA that it is more expensive to build a new house than buy an existing house. What will that do to the property market in Perth moving forward? Well if demand for old houses increases as it is more affordable to buy than build then we would expect a natural correction and return to growth.

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There is little doubt that Sydney’s real estate market can be described as being ‘soft’. However, what this truly means is subject to interpretation. Within Sydney’s key markets, Capital360 has observed the reluctance of the general public to simply jump into property purchases with the same fervour as this time last year. While the number of properties on the market in Sydney has grown significantly over the last 12 months – helping to add to the current malaise and overall negative sentiment – market stock levels in key, investment grade areas has changed very little.

Sydney’s Inner-West currently has a similar number of listings as this time last year whilst Eastern Suburbs stock levels are approximately 15% greater than the same time last year. Perhaps the greatest indication of market sentiment has been the proliferation of properties being withdrawn from auction campaigns (presumably due to a lack of interest) and through the city-wide clearance rate, which is hovering around 55% (down approximately 10%-15% from this time last year).

On face value the generalisations being put forward by mainstream media carry the consistent “Doom and gloom” theme, however, those well acquainted with property investment know this is a superficial observation. With property investment generally being a long-term prospect there will always be certain fluctuations and it is not uncommon for the market to be referred to in such terms as ‘soft’, ‘declining’, ‘stagnant’, ‘falling’, ‘a buyer’s market’ and more.

Labels such as these can bear a variety of meanings to many people and the ability to identify good assets needs to remain a constant. That is: when the market is strong, there are good buying opportunities and when the market is weak, equally, there are good buying opportunities. Investment grade assets may arise at any time and through being able to identify and purchase these properties, Capital 360 is ever mindful of acquiring the best asset at the best price for our clients.
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The sluggish Melbourne market continued in the lead up to the end of the financial year. According to the REIV, clearance rates averaged at 57% which is the third straight month in a row where clearance rates have averaged below 60%. The follow-on affect from a consistently low clearance rate is a build-up of stock that failed to sell at auction. According to SQM research, currently in the metro Melbourne area there are 43,000 properties for sale, this time last year there was 29,000 properties for sale – that’s 14,000 extra properties on the market, which clearly dilutes demand.

So with more stock and substantially fewer buyers (evidenced by a consistently low clearance rate), it would appear things in Melbourne may get worse before we see the market stabilise and improve.  Bucking this macro trend however is highly desirable property, which in most cases is still selling under competition at reasonable prices. The real concern is for vendors who hold property which is less desirable, if they really want to sell, they may need to re-think their reserve price to finalise a sale.

On the positive side, the 2012 financial year activates the state government’s 20% stamp duty reduction for first home buyers, which will hopefully stimulate activity in the first home buyer market, especially given the softening conditions and price reductions from peak 2010 levels. In addition, the vacancy rate is hovering around 2.5% and looks like it will fall further throughout 2011. Theoretically this will put pressure on rents and the improving yields should see the market strengthen over the medium term. Savvy investors buy in softening markets and we are achieving some great results for our clients in the market place – but it’s definitely time to be selective.

With the Melbourne market in relative decline, more and more Melbourne property investors are turning to Capital 360 to help add growth to their property portfolios.  Capital 360’s property strategists help clients by providing and updating clients’ long-term national property strategies.  A strong recent trend is to add quality interstate property to Melbourne-heavy portfolios, focusing on key capital cities (Sydney, Brisbane and Perth).  With Capital 360’s team of experts in each capital city, this is providing our clients with reduced land-tax bills, diversification and adding much wanted growth by taking advantage of the differing state property cycles.
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June has been a month of mixed messages for the Brisbane property market.  Properties you would expect to sell quickly have been on the market for weeks, and properties that are in poor condition are being snapped up in very quick timeframes.  Could this be suggesting that people are looking for the house that they can add value to in preparation of the good times to come in the property market? Only time will tell.

A statistic that seems to worry a lot of investors is that Brisbane auction clearance rates have been very similar to previous months – between 20% and 25% week to week.   Investors should note that Brisbane has never been a strong auction city and you would be farfetched to find a quarterly auction clearance rate of more than about 30% over the past 3-4 years in Brisbane.  So despite low auction clearance rates, the market is still quite active.

June also saw the Queensland State Government decide to abolish the stamp duty concessions for home buyers as of 1 August 2011.  This is expected to create an artificial peak in the market between now and 1^st August as home buyers rush to get a property before the stamp duty doubles.  This does not affect investors in any way as stamp duty stays the same.  The incentive that has been offered as part of this package is for investors who purchase a new property or off the plan after 1^st August 2011 is a $10,000 additional payment from the Government.  This is expected to promote some strong sales in off the plan and new developments, but again, only time will tell if this occurs.

A big plus for the market is that it has shown some signs of bottoming out.  Since monitoring the negotiation rate and the discount to list price, it appears that property prices have been near level since April 2011.  This is a good sign for investors as the bottom of the market is always a good time to buy.  Given this has occurred for a period of 2-3 months now, the market may show some signs of growth in the coming months.
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The end of the financial year is traditionally a slow time for the Perth property market. The exact reason is hard to pinpoint. It could be that people are focusing on getting their tax affairs in order or just the bleak cold weather that tends to keep people from looking. Either way, there are some signs that contraction of the market is coming to an end.

Firstly the number of property sales in the last week across the state was 903 compared to 929 for the same period last year. This number shows that market transactions are on par with a year ago. Secondly we are seeing rental vacancies continue to tighten with market rents showing no signs of slowing their growth.  What is becoming more evident is that we are not far from the tipping point where it is more economical to purchase than to rent. This will drive the lower end of the market which will have a flow through effect to the other sectors of the market.

Finally BIS Shrapnel released a report stating that they are forecasting a 20% increase in Perth property prices over the next three years. This equates to a 6% increase per annum. On an average Perth house of $480,000 this would equate to a value in three years of $570,000 or $30,000 in capital growth per annum. BIS Shrapnel are basing their views on the rally in the mining resources sector forcing a net migration increase in skilled and unskilled workers that cannot be met with the existing and new housing stock levels. Overall, our research and views that we have been conveying, about the market moving later in 2011 is starting to look more likely.
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Over the last 18 months Sydney’s middle and inner-ring suburbs have done nothing but surge at a furious rate and now that prices (and capital growth) appear to be flatlining, many commentators and market sceptics have caused a frenzy in local and national press. Despite negative sentiment in the press, successful investors know that this is a time to “hold ‘em, not fold ‘em” and with rents solid across the board, it is unlikely there will be a glut of properties on the market with decreased asking prices.

It is essential to remember that lean times are as much a part of the property cycle as boom times and the offering of investment grade properties to the market does not stop. Capital 360 has recently noticed that renovated properties in premium areas are commanding similar prices to the past months (perhaps due to the fact that they can get market rent from day one) while those properties in need of works are comparatively discounted. It may be that some buyers are conserving cash reserves (otherwise put aside for renovations) in the case of likely interest rate rises.

Nonetheless, properties with renovation potential are proving a significant opportunity to enter suburbs of potential strong growth. These properties are ideal for a ‘buy and hold’ strategy and, given the correct management of renovation works, can get handsome rental income whilst creating a favourable depreciation schedule.  With a reduction in the number of active buyers in the market place vendors are now faced with the prospect of either enduring longer sales campaigns and/or be more malleable with their price expectations. As a direct result fewer properties are being listed for auction (in our target areas) or are more likely to be sold prior to their auction date. There’s no doubting that we are now in a buyers’ market and we expect this trend to carry on moving forward. The question that needs to be asked amongst prospective buyers is: “How can I use this best to my advantage?”

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Well it’s officially a buyer’s market in Melbourne with the clearance rate averaging 58% for the month of May. The clearance rate has been progressively declining since the start of the year, however this is the first time it’s averaged below 60% for 2011. Whilst the market is not in free fall as some of the papers suggest, there are definitely some anxious vendors in the market place and we are seeing some good buying, especially in the sub $750,000 market. In real price terms it appears that property has been discounted to early 2010 levels  – up to a 5-10% reduction depending on the price point and the area.

Incoming stock levels were again down from 2010 with approximately 20% less stock coming on the market. According to SQM research the Melbourne metropolitan vacancy rate remained steady for May at around 2.6% which is also generally in line with this time last year. As there is less property on the market and less people wanting to buy, you should see this vacancy rate fall throughout the year putting upward pressure on rentals and improving yields. According to the REIV the final auction week saw 487 homes being auction with 342 properties passing in – this means that only 30% of property’s are being sold under the hammer and you have a 70% chance of ending up in a pass in situation. So where do you start the negotiations? It really does pay to get quality advice and be fully informed in these high pressure situations, because after all, the estate agents job is to extract the highest possible price for the vendor.

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As the days get colder (well by Brisbane standards anyway) and we come toward tax time, Brisbane has seen yet another month of limited growth in the market.  The number of properties for sale has increased and the number of buyers has remained roughly the same.

Auction clearance rates are less than 30% week to week and the average time a property is on the market has increased past 60 days according to RPData.  If you are a home owner in Brisbane and are wanting to sell, this is not great news, but if you’re a property investor and you want to buy at the bottom of a market, then this is positive news if you’re considering purchasing in Brisbane.

Vacancy rates are near an all time low and properties Capital 360 has bought for clients are generally returning a gross rental of 5% or more.  But if you are looking to invest in Brisbane, be sure to do the research.  The areas of oversupply in Brisbane are generally in areas further from the CBD.  Areas where new properties have been constructed in recent years and off the plan house and land packages were bought, are the areas seeing the highest available supply.  Close to the CBD the number of listings is still limited and careful due diligence is definitely required to ensure that you are not paying too much.

Overall Brisbane hasn’t had a big change in values during the month of May however with the low auction clearance rates and increased stock on the market, the signs are all positive for investors to get into the market.

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The WA property market is seeing unprecedented demand for its resources yet the residential property market is not reflecting the nature of the shortage of housing that is transpiring in the state. The population growth of WA continues to be the strongest of any state with the population targets for the state expected to grow to 3.5 million.

On the business front the State Government has announced plans for 2000 affordable houses yet no details have been released. CBRE have just announced this week that the commercial office vacancy rate will fall below 5% as mining companies are taking out more and more space in and around the Perth CBD. Office and retail yields are tightening significantly which was the precursor to the last residential property growth cycle in WA.

Rental yields on the residential property market are getting stronger and are heading in excess of 5%, yet we are still seeing stagnation in the residential property market in terms of price growth and demand. This is probably being driven by the fear of the RBA pushing up interest rates, the traditional start to winter trading, as well as the difficulty the banks are causing in relation to valuations and finance applications.

Great buying opportunities are present at the moment as the supply of properties is significantly higher than normal and the number of interested purchasers seems to be on the decline.  What is evident by the economic and business data is that Perth has significant positives ahead irrespective of the current residential market.

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Each of our Capital 360 State Directors bring you the latest in property market news from Sydney, Melbourne, Brisbane and Perth.

April has demonstrated that the key areas of Sydney’s real estate market continue to be hotly contested with premium properties commanding significant levels of interest with well-educated homebuyers and investors confident in their property choices. This aspect of the current market also helps to demonstrate the prevalence of a “two speed” dynamic within Sydney. Higher priced properties and those lesser quality properties have suffered in recent weeks while, in stark contrast, more affordable properties with good fundamental attributes have been swamped with interest.

This trend is also witnessed across recent auctions. Sydney-wide auction clearance rates are beginning to plateau in the low to mid 50%’s. This is normally associated with a softening in the market, however rather than becoming a buyers’ market we are noticing that more and more buyers are migrating to proven investment areas in Sydney, creating hot spots of interest. This is directly mirrored in the clearance rates in our key suburbs. For example, while auction clearance rates throughout the city are hovering around 55% the clearance rates in hot spots such as Newtown and Chippendale are closer to 86% and 80% respectively. Where possible, Capital 360 has been able to initiate pre-auction offers to try and secure the sales of investment grade properties outside of the frequently heated environment of an auction – paying dividends for our clients. Access to amenities and lifestyle attractions continues to be a key driver for attracting investors and homebuyers to properties of all kinds; houses, apartments, terraces and townhouses. All will continue to draw strong interest, particularly as Sydney’s vacancy rates continue to fall and sound rental returns are further guaranteed.

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The Melbourne market continued its softening trend through April with the average clearance rate for the month falling slightly to 60%, according to the REIV. The clearance rate is down approximately 5% from March 2011 and approximately 15% from April 2010. A natural reaction to falling clearance rates and a softening market is a reduction in the number of new listings, down around approximately 10%-20% from 2010 levels. Obviously as prices soften fewer vendors are motivated to sell and this has an impact on the amount of choice that is in the market place.  Despite the reduction in stock and prices we are still seeing very low numbers of bidders at auction with the majority of auctions having 1 or fewer actual bidders.

On the positive side of things fewer purchaser generally coincides with more renters. This is reflected in the March vacancy rate which according to SQM research is down from 3.1% in February to 2.4% in April. The steady reduction in vacancy rates should see a moderate rise in rents over the course of the year. With prices reduced, rents strengthening and a slightly ‘spooked’ Melbourne market, it’s a great time to get some advice and purchase well.

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As April comes to a close and Queenslanders extended their two long weekends into an 11 day break, the month of April hasn’t seen any major change from March. A fall of just over 2% in median prices over the March quarter, results in Brisbane becoming the most affordable mainland city, with a median house price at $448,669. The ABS housing price index was down 1.7% for the March quarter, so Brisbane has only seen a slightly higher than average fall.

Even though just over 2% seems like a big drop, given the devastation caused by the floods in January, this is quite a small reduction in the average price of housing.  With experts predicting 15-50% drops in prices from the floods, a 2% downturn is a great result for Brisbane.  Given that Brisbane is now the most affordable mainland city and it has the 3rd largest population in Australia, signs are pointing to an upswing in the market.

There are some strong signs of an improvement to the market.  The rental vacancy rate is below 1.7% and rents have increased marginally in the January to March quarter of 2011.  Sale prices are seeing a reduction of between 6-7% from the listing price.  During the first two thirds of April properties that had been on the market for a few months were being snapped up as purchasers from interstate are looking to grab a bargain before the media changes their tune.  Flood repairs are into the billions and this is all going into construction and rejuvenation of the Brisbane area, which in turn is stimulating the Brisbane economy.

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The value of houses and units in Perth fell again in the March quarter despite renewed activity in the resources sector. This lag effect was seen prior to the last resource boom and hence opportunities to maximise from the current value buying environment are expected to diminish over the rest of this year.
The median house price in Perth fell by 1.1 per cent in the March quarter to $540,978, taking the annual fall to 4.1 per cent. This has made Perth one of the weakest markets in the country as compared to national data showing a quarterly fall of 0.6 per cent and an annual rise of 0.2 per cent. Perth is now the second cheapest state in which to purchase a property.

With high levels of stock on the market and a continued decline in first homebuyers as well as investor activity, most markets have struggled to rebalance from the buyers’ market conditions evident since late 2010. The Perth housing market remains subdued with low buyer confidence continuing to constrain activity levels; however the continuing resources boom should generate a revival in the market by year’s end.

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On the Ground – April  2011

Each of our Capital 360 State Directors bring you the latest in property market news from Sydney, Melbourne, Brisbane and Perth.

Sydney

As March draws to a close, and a plethora of new listings begin to hit the market in April, it is becoming increasingly apparent that Sydney is becoming a buyer’s market – albeit fleetingly. It is crucial to note that those properties that Capital360 deems as ‘investment grade’ remain well insulated against the majority of the bearish press of late. Properties of interest are remaining buoyant in terms of both interest levels and price expectations whilst, at the opposite end of the scale, some lesser quality housing stock, sustained during previous months by a more heated market, has dropped significantly in buyer demand.

With these properties, although it may be possible for purchasers to snag a “bargain”, it may not represent the most ideal investment as they tend to be located in areas with both sub-par capital growth and rental yields. While some vendors will need to realign their expectations with the changing market conditions, other recent sales demonstrate that the expectations of both sales agents and their vendors are still being surpassed where buyer interest is high. The ability to secure “bargain” quality property is still a mirage on the horizon for many buyers.

At the coal face, the Capital360 team is ever mindful of the two crucial elements required in today’s market – timing and negotiation (and the ability to conduct expedient due-diligence) and notes that these are critical to securing the best property at the best price..Back to top

Melbourne

As we move closer to Easter the Melbourne property market appears to be begging to soften.  According to the REIV the clearance rates have been at around 66% week after week. Whilst this is quite healthy, the unsold stock is beginning to dilute the market place and we are seeing a reduction in the number of bidders at auction. Comparatively this time last year we had witnessed very similar stock levels go to auction, approximately 2700 for the month of March, however clearance rates were consistently 80% or more. In addition to this there were more buyers, around 5 bidders was not uncommon and so even the stock that was left behind was quickly being snapped up by those who were unsuccessful on auction day. Consequently as general stock levels increase the opportunity for buyers to purchase well also increases and savvy investors may enter the market place once more.

 Investors may also be pleased that vacancy rates have fallen slightly down from 3.1% to 2.6% according to SQM research. This puts the vacancy rate generally in line with this time last year and should see rents stabilise or rise marginally. The strengthening vacancy rate and overhang of supply present a great opportunity for those looking to purchase in the first half of 2011..Back to top

Brisbane

After the slow start and the lack of sales and growth in the first 2 months of the year, Brisbane has started to see more action in the marketplace. Signs of a strengthening property market can be seen as properties that have been on the market for weeks or months are starting to get snapped up at prices higher than expected. The rental market is still going very strong with very few vacancies when compared to the same time last year.

However the prestige property market is seeing a big differential.  There is very limited riverfront stock that did not get flooded and interest in these properties is at new heights.  The biggest difference is the popularity of elevated properties with City and river views.  These are the pick of the prestige market as owners are looking for a high and dry home with safe future growth.

The townhouse market for Brisbane is a market that has been difficult to track given that there are generally only statistics for units and for houses.  However, we consider townhouses are a very good opportunity in Brisbane.  There are very few developers building townhouses close to the CBD as majority are now going to units instead.  This will result in a very low supply of townhouses and we consider will have a positive impact on the pricing.  Brisbane townhouses are generally in the range of $450,000-$550,000 depending on the area.  They provide the low maintenance alternative to housing, but a larger space and outdoor area than the majority of units.

 It has been a great purchasing time for Capital 360’s clients in the past 2 months in Brisbane with opportunities secured including a block of 6 flats, purchased at over 10% below market value for 6 individual clients and properties secured substantially below the price paid 2-3 years ago. .Back to top

Perth

The WA property market continues to track along without showing any signs of immediate growth. There are still around 17,000 properties on the market, however nearly one third of those properties are located from Mandurah down through the south west.  The five quarters of negative growth have been largely caused by the substantial decreases in values from this south west region and have resulted in better value emerging.

Vacancy rates continue to tighten and Colliers International has just released a report stating that WA’s apartment supply has now dropped to a level where demand is out-pacing supply. This along with the future population growth forecasts is pushing selling rates for apartments as high as $9,000 per square metre.

Perth is also seeing an increased interest from buyers located in areas such as Singapore and further abroad.  The factors driving this increased interest from overseas are that Perth is seen as a safe and stable city with quality educational, lifestyle and work opportunities. As the year progresses the Perth market is expected to see some steady growth beginning to emerge..Back to top