House Prices Flat in August

AUSTRALIAN house prices were flat in August, although Adelaide and Canberra experienced some growth.

House prices in Perth and Hobart fell more than one per cent in the month and there was little price movement in Sydney, Melbourne and Brisbane, the RP Data-Rismark August Index showed.
Adelaide and Canberra prices increased more than one per cent, while Darwin home values fell half a per cent.

The index posted a 1.6 per cent increase in Australian home values over the past three months but a fall of 2.4 per cent over the year to August.
During the quarter to August, Darwin was the best performing capital city, registering 5.2 per cent growth.

This was followed by Melbourne at 2.5 per cent, and Sydney at 2.4 per cent.
Perth and Brisbane recorded marginal growth of 0.2 per cent and 0.6 per cent respectively over the three-month period.

RP Data research director Tim Lawless said Sydney dwelling values increased in five of the past eight months, helping to provide a cumulative capital gain of 1.9 per cent over the year to date.
"Sydney is proving to be one of the most consistent performing capitals this year," he said.

A rebound in Melbourne was also encouraging, given more worrying signals earlier in the year.
"Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide," Mr Lawless said.

"The big question is, can this growth be sustained?"

Mr Lawless said the spring selling season would be a good litmus test.

The highest rental yields for houses in the quarter were in Darwin at 5.8 per cent and the lowest yield were in Melbourne at 3.6 per cent.

Legacy of the Sydney Metro Line Land Grab

THE defunct Sydney Metro is still sitting on a $100 million property empire, with at least two office towers about to be demolished more than two years after the former Labor government pulled the pin on the project.
 
In late 2009 the department behind the short-lived Rozelle-to-city Metro line snapped up $124 million worth of property along the proposed route, including several CBD office blocks, and spent hundreds of thousands of dollars more to turf tenants out of some of the buildings.

In February the following year premier Kristina Keneally killed off the project, which by that stage had already cost the taxpayers $356 million.

However, instead of selling off the property portfolio - or at least releasing the properties to earn some much-needed income - the department has held on to the buildings, and two of them are about to be demolished.

Property records reveal Sydney Metro still owns at least seven buildings it bought during the spending spree; some of those are just standing empty.

The biggest single purchase, the $45 million building at 8 Castlereagh St, has since been relet. Two adjacent 11-storey office blocks in Clarence St, above Wynyard Station in the city - which cost taxpayers a whopping $39 million - have sat almost entirely vacant for the past 2 1/2 years.

At 30 Clarence St, just the ground floor retail space remains occupied after the former government spent more than $500,000 in compensation to tenants to end their leases.

Next door at No. 36 the last of the tenants moved out in July after the 10 other floors sat empty for months.

Both buildings are now set to be demolished to make way for the Wynyard Walk, an underground passage linking the station to Barangaroo.

In late 2010 Ms Keneally announced the $300 million Walk as an alternative link to Barangaroo after the Metro axing left the $6 billion redevelopment with limited public transport.

CBRE leasing agent Tim Molchanoff said similar B- and C-grade buildings rented for upwards of $520 a square metre, meaning the government had also missed out on $3.4 million in rent.
A spokesman for Transport for NSW said all the other buildings were leased.

"These seven properties were acquired by Sydney Metro and all are now owned and managed by Transport for NSW,"

Home Owners Forced to Take Super - Australia Mortgage

HOME owners have raided their superannuation funds of a record $100 million in last-ditch bids to avoid foreclosure, new government figures have shown.

The surge in mortgage-holders seeking emergency access to their savings has alarmed housing and social welfare groups, who warn many families are still struggling to meet loan repayments despite steep cuts in the interest rate

With distressed owners receiving an average of $15,250 each, there are also concerns some super accounts could be drained of more than a third of their value. The number of households in serious financial trouble has worsened despite mortgage lending rates falling about 1 per cent in the past six months and nearly 3 per cent since their peak in mid-2008.

Figures obtained by The Sun-Herald showed 6500 home owners were given emergency access to their super last financial year to prevent an imminent foreclosure.

A Commonwealth Department of Human Services report found $99.38 million was released, up 25 per cent on 2010-11 and well above the disbursements in the aftermath of the global financial crisis.
It also marks the third year in a row that the number of people applying for, and being granted access to, their nest-egg has increased.

A campaign manager for Australians for Affordable Housing, Sarah Toohey, said years of house price growth had seen debt balloon and forced households to devote an unsustainable amount of income to meeting mortgage repayments.

''It's alarming and it shows that housing affordability is about more than just interest rates,'' she said.
''The sheer size of what people have to borrow to get into the housing market now really puts household finances under strain.'

Sydney's Housing Market to Continue to Grow

Sydney is Australia's most populous city and its housing sector offers investors unique opportunities with the security that comes with investing in a large and rapidly expanding market.

Property prices in Sydney have increased 25 per cent in the last four years, during which many other housing markets around the world have stagnated or even gone backwards.

The reason that Sydney's housing prices have continued to rise is simple - more people want to live there. Famous for its landmark Harbour Bridge and Opera House, Sydney is the business and financial capital of Australia, with an ideal climate and a relaxed yet cosmopolitan lifestyle.

Sydney has nearly five million residents and its annual population growth rate of 1.6 per cent is higher than the Australian average. It is also higher than that of any major western city outside Australia, yet less than half of this increase comes from births.

Most new Sydneysiders are overseas arrivals who come to Australia to start a new or better life, seeking employment or education opportunities for themselves or their children. They have created a steady demand for around 30,000 more dwellings each year, pushing up prices and making Sydney the most expensive city in Australia to buy a house.

The median price of a Sydney house is now around A$620,000 (S$786,740) and it is rising. Landed properties can be purchased on the outskirts of Sydney for around half this amount, but they are located far from the city centre. Sydney's idyllic harbour side location brings problems, as much of the land is locked away in parks or reserves and there is less available for housing. The urban footprint has spread as far south, north and west as there is land available.

It is almost impossible for overseas arrivals to buy a home until they settle and establish themselves, which can take many years. This has led to a rise in Sydney's rents, which are higher than any other major city in Australia.

High rents and prices have changed Sydney's landscape. They have led to the abandonment of the dream of a landed home for many young Sydneysiders and led to a boom in apartment living. Over half of Sydney's dwellings are apartments or "home units" as the locals call them.

The new medium and high-rise apartment blocks contain gymnasiums, swimming pools and garden barbecue areas. The units are fitted out to attract renters, while their design lowers maintenance costs for investors. Many of the suburbs where this transformation is occurring - such as Pyrmont, Ultimo, Camperdown, Double Bay and Broadway - are located close to the central business district and in the urban centre itself.

What makes these dwellings ideal for investors is that prices for home units are still less than 70 per cent of those of similar sized houses.

The Sydney inner urban market is unique because there are fewer development projects in the pipeline than there are in other cities such as Melbourne even as the rental demand is far higher. Rents in these areas are escalating as a result and housing investors from Singapore can buy off-the-plan units with confidence, knowing that both the rental yield and the value of their investment are likely to rise in the coming years.

Rate rises keep a lid on house prices

SYDNEY homeowners wanting to get rich were dealt a blow last year with six successive rate rises flattening out property values.
Exclusive figures obtained by The Sunday Telegraph reveal Sydney home values failed to rise as high last year as in previous years. The rate hikes since November, 2009 were blamed for the result with median house prices increasing by just 6.51 per cent last year - almost half as much as the previous year, Residex figures show.

The worst-performing houses were in the western suburbs mortgage belt, where the rate hikes had a major impact.

Units fared marginally better with the median price rising 9.42 per cent in 2010 compared to 10.40 per cent a 0.9 per cent decline in the rate of growth.

Sydney's wealthier areas were also not spared with suburbs experiencing negligible growth, or price falls, as the interest rate hikes hit and savvy buyers looked for better opportunities elsewhere, Residex managing director John Edwards said.

"Suburbs such as Rushcutters Bay, Elizabeth Bay and Balmain are traditionally dominated by owner-occupiers and the high prices have clearly placed constraints on how much people can or will pay," he said.

"Today's buyers are thinking very hard about where to buy, the area's prospects and potential for future growth. For the price you pay for units in some of these areas you can buy houses in other suburbs, and that makes them less attractive."

Unit prices were supported by a strong investor market with cashed-up landlords paying premium prices for city apartments The best-performing suburbs were dominated by areas which offered proximity to the city, good transport and lifestyle. Topping the list were Naremburn, Ashbury, Campsie and Kensington, which rose 20-22 per cent.

Finance worker Greg Dick, his wife Pong Pon and their seven-month-old twins Natalie and Thomas are typical of the buyers choosing to live in Kensington and pushing up prices as a result.

They family paid a record price of $1.948 million in October for a four-bedroom plus study home in the Raleigh Park Development through Wayne Marks of LJ Hooker Kingsford.

"I basically chose Kensington because we ideally wanted to live in the eastern suburbs and the suburbs directly east and northeast are expensive for what you get," Mr Dick said.

"The area's built out now but there's a lot of renovation going on and we believe still a lot of opportunity for capital growth."

Landlords enjoyed significant rent increases in many suburbs as low affordability keeps many in the rental market. Median rents across the city's units rose by 7.1 per cent or $30 to $450, and by 7.4 per cent or about $30 to $510 a week. The median value for a Sydney unit is $477,500.

Home sales slump for 3rd month in a row PROPERTY SYDNEY

The number of new homes sold fell for the third straight month in July, a report shows, prompting calls for a new federal government to implement a three point plan to tackle the problem.

The latest HIA/Jeld-Wen New Home Sales survey of Australia's major residential builders showed that the number of new homes sold fell by seven per cent in July 2010, the third consecutive fall.

Sales were down by eight per cent over the three months to July to be two per cent lower than a year earlier.

HIA Chief Economist, Dr Harley Dale, said that the severe decline in new home sales highlighted the need for a new government to implement a housing action plan.

"There needs to be a re-doubling of efforts to reduce the impact of regulation, development charging, and excessive taxation on the cost of new housing supply," Dr Dale said in a statement on Monday.

"This action needs to include considerable federal level engagement, without which Australia's dwelling shortage will continue to increase, placing avoidable upward pressure on existing home prices and disadvantaging households seeking to purchase or rent a dwelling."

HIA wants the new government to state their commitment to pursuing three key policy priorities: a new housing cost reduction program, a housing and development ministry recognition and support for small business.

Detached house sales fell by 7.3 per cent in July 2010, while sales in the multi-unit sector fell by 4.1 per cent.

"Large volume builders assess that the confidence of people enquiring about building a new home weakened over the four month period to July. Clearly higher interest rates and the unwinding of fiscal stimulus have had a negative impact on new home building this year," Dr Dale said.

On a state by state basis detached new home sales fell by 12.9 per cent in Victoria, 7.6 per cent in Queensland, 3.1 per cent in New South Wales, and two per cent in Western Australia.

Sales increased by four per cent in South Australia.

Prime minister Julia Gillard and her Labor government are in caretaker mode since last Saturday's federal election resulted in a hung parliament.

Ms Gillard and opposition leader Tony Abbott are in talks with five lower house independents and one Green about forming a government.

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New risks threaten house price bubble - Property Sydney

Gerard Minack, a senior economist at Morgan Stanley, predicted two years ago that house prices were set to experience a dramatic 30 per cent fall by this year given rising unemployment.

''Australian houses are much more overvalued than US houses; indeed, on some measures, our houses are arguably the most expensive in the world,'' Minack said.

''My very simple take on it - the bigger the bubble, the bigger the pop.''

But with no snap crackle or pop, and debate still raging whether there has been a bubble, Minack last week revised his script to envisaging the bubble deflating, not popping.

''Dodging the worst of the global financial crisis didn't demonstrate that there's no bubble. In my view it just showed we dodged the prick,'' he said.

''I'm not persuaded by arguments that houses are sustainably priced. Most measures suggest house prices are around 40 per cent above fair value. However, the risk of big price declines in the near term seems low.''

Minack points out that much of the discussion about the residential market future overly concentrates on owner occupiers despite a jump in taxpayers reporting rental income jumping from 608,000 in the late 1980s to about 1,765,000 now.

He notes the percentage of landlords claiming a rental loss (that is, rent not covering interest and other costs) has risen from 50 per cent to 70 per cent over the past decade.

With broad-based job losses appearing unlikely, Minack now sees the more imminent risks to property price growth as the

banks tightening credit and negative-gearing landlords departing the market due to low capital appreciation.

Ignoring the fact that investment property for many is their nest egg in the absence of superannuation, Minack envisages property investors becoming disillusioned with the ensuing widespread disposal of their investments. ''This is an investment that depends on capital gain for its payback. With net income not even covering interest charges, this is a classic Hyman Minsky Ponzi scheme,'' he says.

''The real return on residential property over the next decade is likely to be negative.''

Minack also took aim at the Reserve Bank deputy governor, Ric Battellino, who recently said that 75 per cent of household debt was held by the upper 40 per cent of income earners.

''It is simply wrong to assert that rental properties are largely owned by high-income households: losing on residential property investment is largely a middle-class affair,'' Minack writes.

''Taxpayers who earn $80,000 or less own 80 per cent of all loss-making properties.''

His 10-year negative return timeline forecast is offered without explanation. But the prospect of a price plateau rather than a pop is a much more plausible position for Minack to now embrace. This is especially so for Sydney which recorded a slump and then negligible price growth for many years after the last investor-inspired boom that peaked in 2004.

Some further excessive froth in Sydney pricing that was evident by late 2007 and early 2008 was removed by the global financial crisis fall-back.

It wasn't until late 2009 that Sydney's median house value finally surpassed the $568,000 peak of early 2004, according to Australian Property Monitors. At its worst, during the global financial crisis, the median was 6.5 per cent off its earlier peak. It's now at $625,000.

But Minack, who lives in Mosman, has only to sound out another economist, Stephen Koukoulas, to know that many neighbourhoods across Sydney are going nowhere fast.

Koukoulas, now based in London as the chief global markets strategist for TD Securities, sold out of Mosman earlier this year for $1,175,000. The Mosman house had traded at $1,285,000 in 2007.

Mosman's pricing is problematic, but Minack's abandonment of his bubble pop forecast is especially intriguing as Melbourne's price juggernaut has put it in a more precarious position than Sydney.

Melbourne's dwelling price growth over the past decade sits at 174 per cent compared with Sydney's 83 per cent, according to Australian Property Monitors.

Over the past five years it has been 66 per cent in Melbourne and 17 per cent in Sydney.

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