As the world is starting to recover

from the global financial crisis,

Australian property stands strong

Business confidence data released this week by the National Australia Bank

showed a significant improvement in confidence levels within the market place.

The index still recorded a negative result (-4.0) for the June quarter however,

it was a substantial improvement on the -24.0 result for the March quarter.

This result follows many recent positive results including significant increases

in consumer confidence figures and positive results for property values.

Employment remains the looming threat with the Government’s official forecast

at 8.5% however, it appears that this forecast may be a little too pessimistic

with the rate of increase in unemployment not as rapid as most had anticipated

and many economists are now anticipating a reduced peak unemployment

figure. The biggest talking point this week was arguably the Reserve Bank

Governor’s speech on the challenges of economic policy. An interesting part

of his speech was the following: “A very real challenge in the near term is

the following: how to ensure that the ready availability and low cost of

housing finance is translated into more dwellings, not just higher prices.

Given the circumstances – the economy moving to a position of less than

full employment, with labour shortages lessening and reduced pressure

on prices for raw material inputs – this ought to be the time when we

can add to the dwelling stock without a major run-up in prices. If we

fail to do that – if all we end up with is higher prices and not many more

dwellings – then it will be very disappointing, indeed quite disturbing.

Not only would it confirm that there are serious supply-side impediments

to producing one of the things that previous generations of Australians

have taken for granted, namely affordable shelter, it would also pose

elevated risks of problems of over leverage and asset price deflation

down the track.”

 These comments have had the vast majority of media outlets jumping on

the possibility of a housing bubble, whilst Governor Steven’s does signal

that sharp price rises coupled with a continued undersupply of housing

could lead to price deflation in the future, the supply side of the equation

is probably more imperative. Rpdata.com have long stated the biggest

constraint to the provision of new dwellings is the availability and cost of

new land and the charges imposed on new development by Local and

State Government’s. The lack of suitable amenity in the outer areas of our

capital cities where the majority of new housing development takes place

also makes the purchasing proposition tough.

Without quality roads, transport amenity, shopping facilities, schools and

health care in these areas the appeal to purchase in these locations will

likely continue to remain subdued until such time as these areas are either:

significantly cheaper housing options than those found throughout other

regions of the city or, the provision of localised amenity coupled with the

opportunity to own a brand new home at competitive prices provides the

incentive to purchase.

As supply and prices in capital cities like Sydney sky rocket, areas like Newcastle

and especially West Wallsend will become more favorable. With the proximity

to the freeway and only an hour drive from Sydney, more and more people are

going to see these areas as desirable.

Locally there is still a high demand for rental properties with an average of 10

enquiries a day for vacant accomodation in the local area. We have  a vacancy

rate of zero and has been that way for some time. Sales are at a stand still as

all stock has been sold. Other agents are relisting sold properties as the valuation

is not coming in on finance, plus a lot are finding it difficult to get mortgage insurance.

 

www.nobullrealestate.com.au

RPData Property Pulse sourced

31/07/09

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