POSITIVE RESULTS FOR PROPERTY VALUES

As the world is starting to recover from the global financial crisis,

Australian property stands strong

Business confidence data released this week 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.

 

 

via RPData Property Pulse