By John McGrath, Property Expert
www.mcgrath.com.au/
RESCU’s resident property expert, John McGrath, gives us his predictions for the real estate market this Spring. It may be time to make your highest offer…
What winter brought
This past winter, we’ve had unusually strong buyer demand coupled with a severe shortage of stock, which resulted in very healthy prices, particularly at auction.
Spring may be the final opportunity for buyers to purchase in a climate that has been affected for two years by the global recession.
The RBA has indicated an interest rate rise of up to 2-2.5% over the next 12-18 months, which may increase sellers for the short term, but I am still convinced that 2010 will be a strong growth year for property values.
Economic recovery
I believe this is the beginning of a long housing growth. There is plenty of evidence that the broader economy is doing better than expected – the key factors are:
- RBA says the downturn in Australia will be “shallower” than expected
- Unemployment is now forecast to reach a peak well below recent expectations of 9%
- The share market is up 30-40% over the past five months
- Consumer confidence is growing
- Interest rates are at historic lows, but expected to rise
Market observations
Here are a few observations and indicators that I’ve observed in the current market:
Spring will be strong. With high buyer demand continuing, outweighing an anticipated increase in listing levels this season will be strong for property.
Properties <$600K will plateau for the next nine months. The likelihood of rate rises in the short term, along with the upcoming expiry of the First Home Owners’ Boost, will take some of the sting out of the sub $600,000 market. We may see prices in this lower end plateau for the next 9 months, but I anticipate it to continue its growth mid way through next year.
The upper end recovery is well underway. Higher priced property will continue to recover as the economy stabilises. RP Data reports a 5.7% gain in Australian prestige property values from January to June alone. Many buyers in the prestige sector are heading into Spring with money to spend in quality suburbs where prices have fallen 15% or more.Auctions clearances to rise. Our auction clearance rates in and around Sydney are now averaging above 70% compared to 46% at the same time last year. This is due to strong demand, limited stock, vendors realigning their price expectations with market values and quality versus quantity.
Rental yields remain high. At an average 5.3% for apartments and 4.4% for houses, rental prices are staying strong. With a slowing of First Home Buyer activity and unemployment rising in some areas, we may see a slowdown of rental demand in 2010, but I still expect rents to increase by around 5% during calendar 2010.
Retirement delayed. We may also see less activity among downsizers and seachange and treechange buyers over the next year or so, as empty nester Australians delay their retirement plans because of their weakened superannuation portfolios.
Expats are keeping an eye out. Expats continue to watch the market very closely via the Internet. We’ve seen young expats utilising the First Home Owners’ Boost as well as families snapping up prestige homes for the future. But this doesn’t mean they’re coming home on mass any time soon – offshore Australians are still the highest paid expats in the world.
Offshore investors buy up. Investment by offshore buyers, particularly from Asia, is growing due to our economic resilience in the global downturn and relaxed FIRB [Foreign Investment Review Board] rules, which enable temporary residents to buy established homes as well as new ones with no FIRB approval (a process that used to take 30 days).
Thinking of buying in the Sydney market? Here are John McGrath’s top-value suburbs for houses and apartments:
Houses:
1. Double Bay
2. North Avoca
3. Bellevue Hill
4. Palm Beach
5. Seaforth
Apartments:
1. Ultimo
2. Avoca Beach
3. Balmain East
4. Milsons Point
5. Mona Vale
For more information and advice, please visit www.mcgrath.com.au/
