We’ve noticed a marked improvement in buyer enthusiasm following the first interest rate cut but it won’t be enough on its own to spark some serious growth. People are looking for more good news to regain their confidence to buy and sell.
Interest rates are definitely an important factor in people’s purchasing considerations, particularly in the sub $1.5 million market, but it’s not the only one. There are other macro issues that are probably a greater influence on people’s current psyche. The European problems are a big dark cloud and if they’re resolved I think that will have a much greater positive impact on the actions of buyers than a quarter percent rate cut.
While we continue to wait for more positive signals, green shoots of growth and new demand continue to emerge. The market under $1 million is strong due to first home buyer and investor activity and while there have been a few good sales at the top end, the prestige sector still lags. We need to see unemployment down, retail spending up, a resolution in Europe, improved bonuses and a good consistent quarter on the stock market for the prestige sector to move. I think we’ll see people getting back on the horse in 2012, as buying opportunities above $3 million are exceptional.
Australian buyers don’t need to see a lot of price growth to regain confidence, they just want to know that home values have stabilised. A lot of people are sitting there with cash in the bank waiting for the signal that the market has leveled and now’s the time to buy. The underlying demand is there, people are just waiting for the bell to ring and I think there’s a good chance that will happen in the first half of 2012.
Attractive fixed rates are proving popular with three year deals as low as 5.49%. Australia’s largest mortgage broker, AFG reports an increase in fixed loans from 7.9% in July to 17.2% in November. Many buyers are waiting for further evidence that interest rates are moving into a downward cycle so a second rate cut is needed to boost their confidence and prompt them into action.
People are looking for some good news. Sentiment can turn quickly and behind the veneer of nervousness, there is a genuine desire to get into the market. A lot of people de-leveraged in the GFC and they are ready to buy again when their confidence is restored.
RP Data figures suggest the window of opportunity to buy at the bottom is closing. Capital city home values recorded their best result in seven months in September, with falling prices slowing to only -0.2% seasonally-adjusted while regional houses rose 0.1%.
First home buyer activity has surged and now comprise 16.4% of the market, up 27% on June this year and 40% on the same time last year. First home buyers stand to save almost $18,000 in stamp duty on a $500,000 purchase if they buy before Jan 1.
With so many traditional asset classes appearing unstable at best or volatile at worst, bricks and mortar should prove to be a popular investment avenue, particularly with the significant baby boomer market. AFG says the percentage of new loans for investors hit a peak of 38.4% in November nationally (44.6% in NSW).
There have been two big investment trends in 2011. The first is more people buying through self-managed super funds. The second is investment from the Chinese, who see Australia as a great investment market with a strong currency and business economy and excellent education opportunities. Traditionally, investors in Singapore and Hong Kong have always liked our market but interest from China has increased strongly since the GFC.
There are exceptional buying opportunities in Australia’s prestige sector above $3 million. In my experience, prestige home values can rise rapidly as soon as economic confidence returns. During the GFC recovery, prestige property prices jumped almost 20% in 2009 alone. In Sydney’s Palm Beach, properties that used to be worth $3 million are now trading for $2.2 million, and it’s a similar story in many other desired lifestyle locations.
According to recent media reports, a record number of Australians aged over 55 are remaining in the workforce or actively looking for work following big super losses during the GFC. We’ve noticed less demand from retirees in coastal markets but this will inevitably pick up as the population continues to age.
Canberra has been a powerhouse market for several years but is now taking a breather, with prices coming back 3-5% in recent months due to higher supply and caution among buyers. Great investment conditions remain with 5-6% yields and low vacancy rates. We’re expecting a seasonal increase in activity at the start of the year as new government employees move in. Our new Woden office is noticing a preference for renovated homes over original properties.
Houses:
Erskineville
Redfern
Rozelle
Taren Point
Vaucluse
Apartments:
Bronte
Little Bay
Milsons Point
Ryde
St Peters
We’re seeing increased buyer activity and general positivity in a number of regional markets as people begin picking the bottom and taking advantage of great buying. Renewed buyer confidence and vendors becoming more realistic after many months on the market is resulting in more sales. We’re also seeing more Sydney investors and young sea/treechangers looking to buy in areas offering jobs and lifestyle.
Out of area buyers are driving demand in lifestyle markets such as Byron Bay, Ballina, Bowral, Wollongong and the Blue Mountains. Our Blue Mountains and Bowral offices estimate 75%-85% of buyers respectively are from Sydney looking for investment, holiday homes and retirement properties.
Sydney investors are increasingly looking at major regional markets offering lifestyle, improving infrastructure and jobs growth such as Newcastle/Hunter, Wollongong, Byron Bay and Port Macquarie. Rental demand, yields and capital growth prospects in these areas are excellent.
The Gold Coast is showing new signs of life with vendors more realistic and buyer sentiment improving. However, it still has a long way to go in its recovery. The Commonwealth Games will be a shot in the arm for the economy with 30,000 new jobs anticipated. There is exceptional value available particularly with family homes in canal and riverside areas. A quality four bedroom home on the water is easy to find for less than $1.5 million. New villas/duplexes in Mermaid Beach and Miami are providing a rare opportunity to buy beachside for under $2.5 million.
We’re seeing new activity in the blue chip Byron Bay Shire and Hinterland market, one of the hardest hit during the GFC. Demand is increasing across all price points including the upper end. Prices are generally are 10-15% off at the lower end and 20- 30% off at the top. Buyers are seeing great value with locals seeking to upgrade and Sydney buyers seeking holiday homes or investments.
The holiday home market has been soft for many years but we’re starting to see new interest from Sydney buyers in Byron Bay and Bowral. The Central Coast is another holiday home market ripe for the picking. In Terrigal, Avoca and Killcare – traditionally popular holiday home areas among Sydneysiders, the buying opportunities above $1 million are the best we’ve seen in 15 years, with twice the normal supply of houses and apartments now on offer.
A proportion of young Sydney couples are continuing their sea/treechange to more affordable major regional markets that offer jobs (or easy commuter access to Sydney) and lifestyle. Markets popular with these buyers include Port Macquarie, Wollongong, Newcastle, Warners Bay and the Blue Mountains.
Ballina
Burleigh Heads (Gold Coast)
Charlestown
Paradise Waters (Gold Coast)
Wentworth Falls
Burradoo
Flynns Beach
Lambton
Mawson (ACT)
St Huberts Island
Improvement in buyer enthusiasm following the first interest rate cut but it won’t be enough to turn the market back to a positive situation in terms of some serious growth.
Macro issues such as the European debt crisis still weigh heavily on buyers’ minds, as do rising cost of living pressures.
Market under $1M strong due to significantly higher first home buyer activity and a peak in investor activity. Buyers are taking advantage of very attractive three year fixed rates.
Exceptional buying opportunities above $3M but major economic changes are required for the prestige property sector to begin moving in a positive direction again.
There is new activity in many regional markets, with Sydney buyers a driving force. The affordability of property in lifestyle areas with strong local economies is attracting investors, young seachangers and a small number of holiday home buyers. There are fewer retirees in major coastal locations but buyer activity overall is strengthening.
Blue chip markets hit hard by the GFC including the Gold Coast and Byron Bay are showing definite signs of new activity across a broad range of price points.
