Australian Property Update - 27th July 2011
This week we take a look at some of the latest news in Australia's Property Market.
- The key drivers for city and regional market.
- EXCLUSIVE OFFER Free financial Planning Pack
- Less houses, more apartments
- Housing price update
- The upside to ‘scaling down’
We hope you enjoy this weeks report and click here or call our office on 02 9917 8600 if you have any questions
Last week we reviewed the top suburbs around Australia for property investment according to expert panels assembled by industry publications ‘Your Investment Property’ and ‘Australian Property Investor. It may be useful to recap the important themes that emerged from analysing their reports.
The 3 clearly defined types of property to emerge from the list of 21 agreed hot spots are
- Boom regional centres experiencing diverse industrial investment
- ‘Affordable’ capital city CBD fringe suburbs (up to about 10km from the CBD) with good access to transport links
- ‘Affordable’ outlying capital city suburbs located on transport links
To simplify things even further, capital city property investment in 2011 comes down to cheap pricing in areas with transport links and for big wins, look at volume of investment in regional centres.
With consumer confidence very low, capital city markets are expected to be flat or falling, with Sydney tipped to lead a slow recovery (see ‘Housing price update’ topic below). There is a strong message from both magazine panels that looking for low priced, un-renovated or otherwise neglected stock in the right areas is a key in this stagnant market.
Regional centres with emerging industry which creates jobs are the standout investment destinations this year. The most obvious is Gladstone, which typifies the boom regional attributes of a long standing and relatively strong and diverse local economy being enhanced by massive industrial investment. We have a feature report coming soon on Gladstone, so stay tunned!
In other words, look to buy cheaply in transport supported areas of capital cities and look for grand spending by others in regional centres.
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There has been much comment in the press of recent times about the rapidly diminishing Aussie dream of home ownership. With the HIA recently reporting that we build only 1.6 houses for every apartment built (down from 3 to 1 a decade or so ago), it seems a balcony not a backyard is now the dream.
Without doubt, the increasing size of our homes in recent decades has put pressure on supply and prices of housing. The new trend to downsizing looks to be following what has happened in the US since the global financial crisis, with planned communities trading off the luxury of space for cheaper access and urban lifestyle benefits.
Recent reporting from the Urban Land Development Authority on South East Queensland highlighted these points;
- House blocks shrink to less than 200sq m
- Backyard footy a thing of the past
- Start saving now if you want to retire
Social analyst David Chalke pointed to the better use of resources on smaller blocks and predicted some likely future consequences;
Downsizing the dream
- Lot sizes as small as 187sq m (7.5m wide by 25m deep) will be offered as part of southeast Queensland developments by early 2012
- Official pricing has not been set, but industry sources say they could be priced between $130,000 and $150,000, with house-and-land packages from $320,000
- Only 2 per cent of blocks in new estates are larger than 600sq m
Average block sizes:
- 1950s: 32-36 perches (810sq m-910sq m)
- 1980-90s: 600sq m
- 2000s: 350 - 450sq m
- 2012: 200sq m - 350sqm
An article in AFR, 20th July provided an update on the outlook for Australia’s capital city housing markets and offered these key points;
According to industry analysts house prices will continue to fall in most capital cities for the remainder of 2011.
- All capital cities, except Sydney, saw median prices fall by more than 1% over the June quarter with Sydney recording a slight growth in prices of 0.6%.
- Brisbane’s median price fell 5.6% over the year, with analysts predicting the worst of the price correction for the state could be over.
- Melbourne’s apartment market is expected to experience a significant correction due to oversupply.
- Sydney has the greatest potential for capital growth as the city is not experiencing an oversupply in stock in comparison to other housing markets.
For regular readers of “What’s Hot and What’s Not” there’s nothing new here. Sydney is the best of a weak bunch at the moment, particularly cheap CBD fringe pockets or cheap outlying suburbs – in both cases as long as they can access Sydney’s poor transport grid.
Melbourne, as reported on (?????) has some oversupply concerns in general and definitely in the inner city precincts of Southbank and Docklands. When banks won’t lend on residential real estate, you should be worried.
Brisbane remains the capital city with the best long term prospects. The quoted price decline is around half of the slip that took place after the 1974 floods, which, as the estimable Terry Ryder observes is an excellent result. As the effects of the Queensland mining boom flow through to Brisbane, cashed up punters with a need for housing will put upward pressure on pricing.
In at tight market, where the capital growth that most investors are looking for is hard to come by, a bit of imagination and lateral thinking can be your profitable edge.
A recent article in smh.domain.com.au told the story of one ‘empty nester’ couple’s solution to their unique circumstances.
The couple faced a common issue for empty nesters left with a large family home – more space than they needed and too much equity tied up in the property. Their solution was to subdivide, which effectively left them with an investment property on the front of their block and a private enclave for themselves at the back of the old block, which duly became 25A.
Obviously there are costs to the demolition and building of two new residences, but by understanding the drivers for their location, in this case cosmopolitan Armadale (located between St Kilda and South Yarra/Toorak, around 8km from Melbourne’s CBD) they were able to structure a profitable deal. We have reported earlier this year on the benefits of battle axe blocks in new developments such as we are seeing on the outer fringes of Newcastle, and this is an excellent application of that principle of creating unique space.
Melbourne’s oversupply issues have been well documented and a lack of investor confidence in a flat market has seen purchasers avoid the premium costs of top shelf property. Young professionals will be competitive for properties in the price bracket down, though – and Armadale sits in the CBD fringe suburbs that currently represent a reasonable blend of lifestyle and price. There were no problems with selling the property when it came time for a seachange.
The single most important point to this tale is that the couple in question have successfully addressed the individual issues for their specific property. Understanding their own needs, the character of both the neighbourhood and their own property, as well as the needs of their prospective tenants allowed them to design a lateral solution. Subdividing the block and creating a desirable living location – “quiet, compact and low-key, yet designed to generate a sense of space and life” - without overcapitalising allowed them to create a profit in the current slow moving Melbourne market.
“It also stands as one brilliant but modest example of how to boost inner Melbourne's population density without throwing up an apartment block.”
- “Wild swings outside city” – smh, 24.7.11
- “Premier, this is how to fix rent scams” – smh, 23.7.11
- “Speculators ‘locking up’ empty dwellings that could be homes” – smh, 25.7.11
- “Inner-city pads on the outer for downsizing baby boomers” – smh, 25.7.11
- City office rents on the way back up” – The Australian, 21.7.11
- “City’s apartments reach for the sky amid thinning demand” – The Australian, 21.7.11
- “Watch what miners do, not say, about the carbon tax” – The Australian 21.7.11
- “Sunshine Coast market recovery to lag behind Brisbane: PRDnationwide” – Property Observer, 26.7.11
- “The home buyers’ losers club” – Property Observer, 26.7.11
- “More suburbs join the million-dollar club in NSW” – Property Observer, 26.7.11
- “Housing investment to fall in Victoria: Deloitte” – Property Observer, 25.7.11
Missed out on last weeks report? Click below to view the July 20th edition of