Australia's rental crisis is set to worsen and sharp rises in rents will continue for at least four years as Capital cities shrinking rental housing supply, especially in Sydney, will take years to ease a report warns.
Rents will jump due to a dramatic fall in the number of apartments built this financial year, the report by industry analysts BIS Shrapnel says.
BIS Shrapnel is predicting apartment rents will rise 42 per cent in the five years to June 2011 - equating to an average of 7.3 per cent every year.
Report author Angie Zigomanis said, since investors began to leave the property market two years ago, off-the-plan sales, which trigger building, had fallen sharply.
"Most new apartment developments won't go ahead until they have sold enough off-the-plan to get enough money to get finance,'' he said.
"At the moment there are no investors in the market to do those pre-sales. The lag between off-the-plan apartment sales and completion means that, even if investors do return, it would take some years before their purchases are translated to new rental supply. The deficiency of rental dwellings will potentially be sustained through to 2011 and beyond.''
Weak growth in the cost of rent in recent years would lead to sharp rises as a shortage of rental stock emerged this year. Rents would rise 7.3 per cent each year, or 42 per cent over the next five years.
But investors would have to wait until mid-next year to see a better return in property prices.
He said two to three years of rental growth was necessary before yields improved to a level which would draw investors back to the apartment market.
"In many instances the value of investment apartments in Sydney has declined in the past two to three years,'' Mr Zigomanis said.
Prices would remain static or decline marginally over the next financial year.
Mr Zigomanis said a peak in vacancy rates in 2003 and lower rental returns had deterred investors.
"A peak in vacancy rates lead to static rents and low rental returns which caused investors to beat a retreat,'' Mr Zigomanis said.
"Since investors have left the market, pre-sales which trigger construction have fallen away and new apartment completions have been drying up.
"Consequently, we expect new apartment completions will show a dramatic decline over 2006/07.''
In June last year, Sydney rents were 6 per cent lower than the June 2000 peak, adjusted for inflation, after showing increases below long-term trends.
Sydney's rental vacancy rate was 1.6 per cent in January, according to Real Estate Institute of NSW figures.
"While attention was focused on rising interest rates last year, the situation for tenants was steadily worsening,'' REINSW president Cristine Castle said.
"The NSW Government needs to take immediate action to encourage investors to enter the property market, which would provide more accommodation for tenants,'' she said.
Sources: Daily Telegraph and AAP
Thursday, February 22, 2007
Wednesday, February 21, 2007
Mortgage interest rates set to rise on economic growth outlook and jobs glut push inflation higher
Inflation is not only high but accelerating, according to a report that strengthens the case for the Reserve Bank to raise interest rates next month for the fourth time in a twelve month period.
The TD Securities-Melbourne Institute Monthly Inflation Gauge showed prices increased by 0.3 per cent last month.
The rise was the third consecutive month of accelerating inflation and came despite the RBA's 0.25 per cent increase in official interest rates in November to 6.25 per cent. Inflation was 3.8 per cent last year, the survey found.
"My reading is that they will look at this and they will look at some of the signals of the underlying strength in the economy — the jobs numbers, the job ads numbers, that kind of stuff — and they are probably going to say 'it's time to go now'," said Don Harding, an economist at the University of Melbourne.
Higher inflation in December came as the price for bananas fell 40 per cent. The gauge last reached 3.8 per cent in August and has not been above it since May's 4 per cent. Both months brought rate rises.
While the study cites higher petrol prices as a source of upward price pressure, CommSec chief equities economist Craig James said in a report that petrol had fallen 1.4¢ in the past week and could fall another 7¢ in the coming fortnight.
Economists are split over the prospect of another imminent rise. ANZ chief economist Saul Eslake said housing figures for November, also released yesterday, showed a market that was slowing even before that month's rate increase. Commitments, or offers for mortgages that either have been or are expected to be accepted, fell by 1.2 per cent over the year to November 30.
"They (the housing finance figures) continue to suggest, as have earlier data, that the interest rate increases that took place during 2006 have flattened the trend in housing finance — I suppose, as you would expect," Mr Eslake said.
The figures would reverse some of the momentum towards higher rates that was built up after unemployment figures released last week showed stronger than expected jobs growth. "You could say, after the data of last week, that it (the housing finance data) perhaps slightly dampens the prospect of a further tightening of monetary policy in February, which the market had increasingly started to price in."
As recently as January 5, futures markets had priced a 28 per cent chance of an interest rate rise into the 30-day bank bill futures for March delivery. That market had yesterday priced in a better than 50 per cent chance.
Westpac senior economist Andrew Hanlan disagreed with Mr Eslake's appraisal and said the housing figures added to the case for another rate rise. Mr Hanlan described the drop of 0.6 per cent in loans to owner-occupiers as "very modest", and showed that previous rises had been less effective than might have been expected.
"Most people would have expected larger reaction to the interest rate tightening than we've seen," Mr Hanlan said.
"The fact that it came in basically flat in November, given the tightening of policy, is quite a resilient result."
Commonwealth Bank senior economist Michael Workman said the housing figures for November showed no impact from that month's rate rise, so they would be of little help to the RBA when it next considered raising rates. "We believe that December (and) January numbers will also show this gradual moderation as the interest rate effects work their way through the system," Mr Workman said.
"It's a pretty finely judged situation about whether there is going to be another rate rise."
Source: The Age, Melbourne Australia
The TD Securities-Melbourne Institute Monthly Inflation Gauge showed prices increased by 0.3 per cent last month.
The rise was the third consecutive month of accelerating inflation and came despite the RBA's 0.25 per cent increase in official interest rates in November to 6.25 per cent. Inflation was 3.8 per cent last year, the survey found.
"My reading is that they will look at this and they will look at some of the signals of the underlying strength in the economy — the jobs numbers, the job ads numbers, that kind of stuff — and they are probably going to say 'it's time to go now'," said Don Harding, an economist at the University of Melbourne.
Higher inflation in December came as the price for bananas fell 40 per cent. The gauge last reached 3.8 per cent in August and has not been above it since May's 4 per cent. Both months brought rate rises.
While the study cites higher petrol prices as a source of upward price pressure, CommSec chief equities economist Craig James said in a report that petrol had fallen 1.4¢ in the past week and could fall another 7¢ in the coming fortnight.
Economists are split over the prospect of another imminent rise. ANZ chief economist Saul Eslake said housing figures for November, also released yesterday, showed a market that was slowing even before that month's rate increase. Commitments, or offers for mortgages that either have been or are expected to be accepted, fell by 1.2 per cent over the year to November 30.
"They (the housing finance figures) continue to suggest, as have earlier data, that the interest rate increases that took place during 2006 have flattened the trend in housing finance — I suppose, as you would expect," Mr Eslake said.
The figures would reverse some of the momentum towards higher rates that was built up after unemployment figures released last week showed stronger than expected jobs growth. "You could say, after the data of last week, that it (the housing finance data) perhaps slightly dampens the prospect of a further tightening of monetary policy in February, which the market had increasingly started to price in."
As recently as January 5, futures markets had priced a 28 per cent chance of an interest rate rise into the 30-day bank bill futures for March delivery. That market had yesterday priced in a better than 50 per cent chance.
Westpac senior economist Andrew Hanlan disagreed with Mr Eslake's appraisal and said the housing figures added to the case for another rate rise. Mr Hanlan described the drop of 0.6 per cent in loans to owner-occupiers as "very modest", and showed that previous rises had been less effective than might have been expected.
"Most people would have expected larger reaction to the interest rate tightening than we've seen," Mr Hanlan said.
"The fact that it came in basically flat in November, given the tightening of policy, is quite a resilient result."
Commonwealth Bank senior economist Michael Workman said the housing figures for November showed no impact from that month's rate rise, so they would be of little help to the RBA when it next considered raising rates. "We believe that December (and) January numbers will also show this gradual moderation as the interest rate effects work their way through the system," Mr Workman said.
"It's a pretty finely judged situation about whether there is going to be another rate rise."
Source: The Age, Melbourne Australia
Tuesday, February 06, 2007
Brisbane man charged over property fraud
POLICE have charged a 42-year-old Brisbane man with fraud offences totalling more than $800,000.
The man, from Kenmore in Brisbane's west, allegedly used a forged birth certificate to obtain a Queensland driver's licence and bank mortgages for the purchase of three homes in Brisbane.
Police also allege he obtained personal finance totalling $90,000 through credit cards.
The man was arrested last night and is currently being held in the Brisbane watchhouse.
He will appear in the Brisbane Magistrates Court 5th February 2007.
Source: AAP
The man, from Kenmore in Brisbane's west, allegedly used a forged birth certificate to obtain a Queensland driver's licence and bank mortgages for the purchase of three homes in Brisbane.
Police also allege he obtained personal finance totalling $90,000 through credit cards.
The man was arrested last night and is currently being held in the Brisbane watchhouse.
He will appear in the Brisbane Magistrates Court 5th February 2007.
Source: AAP
Monday, February 05, 2007
First time home buyer and investment property hotspots in Adelaide South Australia
If you are a first home buyer or a property investor then take a look at Adelaide's hotspots, Mile End and Port Adelaide in South Australia's for capital growth.
But property investors who want a high yield rental income, it's a better bet to look in the city, outer suburbs or Iron Triangle towns.
A recent survey by Smart Money asked 10 of the state's biggest real estate companies for their views on which areas offer the best potential for property investors.
"Generally suburbs which are closer to the city and beach have provided better capital return over the long term," Raine & Horne manager for Burnside and Norwood, Joe DeConno, said.
L.J. Hooker regional director Rod Adcock said Mile End and Port Adelaide were "under-valued, close to the CBD and mainly comprise properties that would respond to update and improvement, therefore with potential capital growth".
Other capital growth hot spots include North Adelaide, Stirling, Payneham, Norwood and Brighton. No suburbs on the capital growth list made the high-yield list. "You are not going to get high yields in low risk areas," said Elders City Plus managing director Robin Turner, who recommends investors put capital growth above yield.
Mr DeConno said outer lying suburbs give better rental yield as purchase prices are lower.
"Some of these suburbs have recently also provided excellent capital growth, but this may not be as consistent as some of the inner suburbs are," Mr DeConno said.
Apart from the city itself, the best areas for yield include Elizabeth, Hackham, Whyalla and Port Pirie.
Professionals SA chief executive Ted Piteo said the city benefited from the growth of accommodation for overseas, interstate and country students, and more young professionals were moving to the CBD.
"Inner-city living represents great value for this market because of the proximity to all their required facilities," he said.
Mr Turner said pressures such as water restrictions and high fuel costs were making city living more desirable.
"A lot of ageing baby boomers are now looking at the city lifestyle," he said. So what is the best type of property to buy? Apartments, townhouses, units or stand-alone houses?
The answers varied widely among real estate agents, but bigger properties able to be subdivided were a popular choice.
"Land is the scarcest of commodities," Mr Turner said
Source: The Advertiser South Australia
But property investors who want a high yield rental income, it's a better bet to look in the city, outer suburbs or Iron Triangle towns.
A recent survey by Smart Money asked 10 of the state's biggest real estate companies for their views on which areas offer the best potential for property investors.
"Generally suburbs which are closer to the city and beach have provided better capital return over the long term," Raine & Horne manager for Burnside and Norwood, Joe DeConno, said.
L.J. Hooker regional director Rod Adcock said Mile End and Port Adelaide were "under-valued, close to the CBD and mainly comprise properties that would respond to update and improvement, therefore with potential capital growth".
Other capital growth hot spots include North Adelaide, Stirling, Payneham, Norwood and Brighton. No suburbs on the capital growth list made the high-yield list. "You are not going to get high yields in low risk areas," said Elders City Plus managing director Robin Turner, who recommends investors put capital growth above yield.
Mr DeConno said outer lying suburbs give better rental yield as purchase prices are lower.
"Some of these suburbs have recently also provided excellent capital growth, but this may not be as consistent as some of the inner suburbs are," Mr DeConno said.
Apart from the city itself, the best areas for yield include Elizabeth, Hackham, Whyalla and Port Pirie.
Professionals SA chief executive Ted Piteo said the city benefited from the growth of accommodation for overseas, interstate and country students, and more young professionals were moving to the CBD.
"Inner-city living represents great value for this market because of the proximity to all their required facilities," he said.
Mr Turner said pressures such as water restrictions and high fuel costs were making city living more desirable.
"A lot of ageing baby boomers are now looking at the city lifestyle," he said. So what is the best type of property to buy? Apartments, townhouses, units or stand-alone houses?
The answers varied widely among real estate agents, but bigger properties able to be subdivided were a popular choice.
"Land is the scarcest of commodities," Mr Turner said
Source: The Advertiser South Australia
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