House prices up 0.4% in July, RP Data predicts little growth for the remainder of 2010

Credit: Smart Company

Australian house prices grew by a seasonally adjusted 0.4% during July, following on from a 1% fall in June, according to the latest RP Data-Rismark figures.

The research found that in the July quarter, national city dwelling values were down 0.8% with a median dwelling price of $465,000. However, prices over the year were up by 9.7%.

Darwin performed the strongest in the three months to July, with values up 1.1%, while Brisbane and Perth both recorded a 2.5% fall.

Sydney values rose by 0.3% during the quarter, with Melbourne values falling by 1.1%. Adelaide prices rose by 0.2% and Hobart prices also fell by 2.4%.

RP Data research director Tim Lawless said in a statement the result shows the housing market is recording a soft landing, following a boom over the past 18 months.

"In the period between end 2008 and March 2010, Australian home values rose by 16.3%. Yet monthly growth rates have declined consistently since the start of the year," he said.

"RP Data and Rismark expect to see the market track sideways over the second half of the year. There is the possibility of modest gains if mortgage rates remain in check and economic conditions improve."

Rismark International managing director Christopher Joye also said in a statement the figures dispel the myth that housing prices would begin to fall.

"Australia's housing market appears to have gravitated back to a no-to-very low growth trajectory, as we forecast."

"Looking forward, I would expect to see the major banks pushing housing credit growth a little harder as profitability gains – driven by reduced impairment provisions across their business lending books – dissipate."

This comment comes as a number of banking institutions, including Westpac, BankWest and non-bank lender Yellow Brick Road, have introduced a number of measures in order to attract first home buyers.

"Australian housing credit growth has been running at record low levels, and has experienced a downward trend since 2006. An increase in credit growth back to reasonable single-digit rates will provide further support to the market in the next 12 months."

Credit: Smart Company

Let's end house price hysteria

Credit: Christopher Joye

It would appear that my old sparring partner, Associate Professor Steve Keen, has once again got his calls wrong.

Following the release of RP Data-Rismark’s June house price index results, which recorded the first fall in Australian home values in 17 months, Keen wrote with glee that he expected to see "an accelerating rate of decline in [Australian] house prices now, as they did in the USA when 'flip that house' ceased being a winning trade." That’s right – it was a bold bet: an “accelerating rate of decline”.

Now remember that this came from the same man who during the GFC told us that the price of Australian housing was going to "fall by 40 per cent or so within a few years", that a depression in Australia was “almost a certainty … best case scenario is a recession more severe than 1990 lasting one and a half times as long” and that Australia’s unemployment rate would rise to “double digits”. You get the drift. Of course, it makes for terrific media fodder.

Sadly for Dr Keen, RP Data-Rismark’s July house price index results have proven him wrong yet again. After a large 1.0 per cent seasonally-adjusted fall in the month of June, Australian home values were little changed in July, recording a raw increase of 0.1 per cent (+0.4 per cent seasonally-adjusted). The previously-reported June quarter result was revised down slightly to -0.1 per cent (was +0.1 per cent). Put more bluntly, there is no acceleration in house price losses to be seen here.

Read more here.

Prestige purchases on the rise

Credit:REINSW
Sales of prestige homes were up 3.35 per cent on the previous quarter, reveals a report for REINSW by valuer Dyson Austen.

In three months, 10 Sydney homes have been purchased for a total of more than $120 million. An interest rate rise of 0.5 per cent and stock market decline of 11.6 per cent weren’t a deterrent to these pricey purchases.

The prestige market bottomed in the June quarter of 2009. It has since risen by more than nine per cent. However, this is still lower than the overall increase in Sydney house prices by 21.4 per cent over the same period, according to the Australian Bureau of Statistics.

Credit:REINSW

Island holiday homes beckon for Aussies

Credit: News.com.au
FORGET the traditional shack on the coast - Australians are taking advantage of the strong Aussie dollar and abundance of budget flights to buy holiday homes overseas instead.

Fiji, Bali and Malaysia are among the most popular destinations for people looking to buy international properties as investments and vacation getaways.

"There's an increased number of people buying in New Zealand as well and that's mainly due to the fact they have some favourable exemptions there, such as no capital-gains tax," Property Planning Australia director Angelo Piazetta said.

"I think it just depends on who has the best marketing - in the past year people have been interested in Malaysia because there's new complexes or apartments going up there."

Bob Lowres and his wife, Libby, had been looking to buy a property in Noosa, but decided they could get more bang for their buck in Fiji when they decided to move from Brisbane eight years ago.

But when Mr Lowres felt he wasn't quite ready to retire, the developer started looking for development opportunities and stumbled across Naisoso Island, where you can buy land and build a house from $500,000.

A $400 million master-planned resort, which will have 150 beachfront apartments, a four and five-star hotel, wellness centre and marina, has been so popular with Australians it is being dubbed "the new Niseko".

"When I was growing up the family holiday was very much the beachside home," he said.

"Now many baby boomers are reaching retirement, they want to enjoy it and I don't think this generation likes to rough it."

Real estate agent Carol West, from The Professionals Fiji, said the number of Australians buying there had doubled in the past two years.

Most Australian buyers were baby boomers and retirees from the Gold Coast, Sydney and Melbourne and a few from Adelaide and Noosa.

Ms West said people were realising how far their dollar could go there and that there were four airlines linking the countries.

"You can buy a property on Denarau for around $400,000 and the competition between the airlines drives the price of flights down," she said.

"People are realising they can get on a plane and be here in a few hours and be in a different world."

Credit: News.com.au

Finding your property investment's inner strength

Credit: Eddie van Pamelen
As the property market takes a breather and prices that were booming earlier this year start to cool off, it’s important for investors to remember one of the critical rules when it comes to buying property; location is key.

When we enter the slower phase of a property cycle, as seems to be occurring now, the importance of location becomes very apparent.

As most seasoned investors know, part of growing a successful portfolio is purchasing in tried and tested areas that consistently provide strong, above average, long term capital growth.

In our experience, the most proven suburbs are always found around the inner areas of Australia’s major capital cities and bayside locations. You don’t have to take my word for it; just consider data recently released by the Real Estate Institute of Victoria that clearly shows inner Melbourne house prices have significantly outperformed their more distant counterparts over the last decade.

The REIV figures demonstrate that inner city property owners have done considerably better than those in the middle and outer rings, as house prices within 10 kilometres of Melbourne CBD have risen by 88% since 2005, compared with 80% for suburbs within a 10 to 20 km radius of the CBD and only 53% for outlying areas.

So why does this trend continue? Quite simply, it is the result of supply and demand and the perpetual imbalance between these two factors that exists around our capital cities.

Demand for inner city living continues to grow, as people seek to live closer to their work, good public transport links and shopping and entertainment hubs; essentially, sought after inner city suburbs that offer a modern lifestyle for young singles and couples just keep gaining popularity.

However, land in these areas is simply unavailable; they’re not making anymore and most of the existing land is already built out. In other words, even though demand continues to escalate from a booming population, the supply of dwellings around the inner ring of Melbourne’s CBD is very limited. It is this imbalance that causes property prices to rise.

Conversely, in the outer suburbs that have shown the least growth over the last five years, supply generally outweighs demand. These areas are traditionally not as sought after due to their distance from employment and infrastructure and there’s often large tracts of developable land still available; it’s the combination of these factors that tends to keep a lid on property prices in Melbourne’s outer corridors.

The REIV’s communications manager Robert Larocca says quality of housing doesn’t seem as important when it comes to inner city property values; rather it is the mere fact of close proximity to the CBD.

He says you only have to consider the two markedly different inner city suburbs of Camberwell and Footscray. In the prestigious neighbourhood of Camberwell, the median house price was just over $1.5 million in the March quarter this year, while Footscray’s median house price was a more affordable $563,500. Yet in both neighbourhoods, prices have risen by 201% in the last decade.

Leading the field when it comes to house price growth in the inner city since 2000 was South Yarra, with a 314% increase, followed by Malvern (303%), Hawthorn East (261%) and rounding off the top five were Kew and Prahran on an equal 257%. It’s interesting to note that all of these areas are in the South Eastern or Eastern corridors of Melbourne’s inner city.

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Morgan Stanley analyst bearish on housing market

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• Australia in housing bubble, analyst says
• Could be pricked if banks tighten credit
• Owner-occupiers in "too much debt"

LOCAL property investors have become "Ponzi borrowers" in a market 40 per cent overvalued, according to a Morgan Stanley strategist.

In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia's housing "bubble" could be pricked should banks tighten credit or "loss-making" middle-class landlords start to sell.

He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments, The Australian reported.

Compounding the problem is "ill-advised policy", such as the government's first home-buyers grant, which has combined to make Australian houses "40 per cent above fair value", Mr Minack says.

"Buying an asset that's over-priced never ends well," he said. "The real return on residential property over the next decade is likely to be negative, in my view."

"Owner-occupiers have played a game of financial chicken, competing for property by taking on increasingly imprudent amounts of debt.

"Investors have become Ponzi borrowers -- Hyman Minsky's term for borrowers who rely on capital gains to repay debt and interest -- in the belief that housing is a sure-fire long-term investment. History shows that it isn't."

Australian Bureau of Statistics figures show overall average house prices rose 18.4 per cent for the full year to June, with Sydney prices rising 21.4 per cent -- the largest since it began recording these figures in 2002.|

But the rate of growth has been slowing in recent months as rising interest rates feed through the economy.

Commonwealth Bank of Australia, the nation's largest bank by market value, also warned last week it could be forced to raise rates independent of the Reserve Bank. CBA's full-year results showed some key business units were struggling with higher costs.

On the positive side, Mr Minack said the most plausible trigger for a correction in the Australian housing market -- broad-based jobs losses -- doesn't appear likely in the near term. This means big price declines in the near term "seems low".

Australia's jobless rate rose to 5.3 per cent in July, from 5.1 per cent, as more people decided to look for work and as full-time employment fell for the first time in 11 months.

The RBA – one of the few central bank's in the developed world to raise rates since the global financial crisis -- has been on hold since May as six rate rises since October feed through the economy. The official cash rate stands at 4.5 per cent.

But Mr Minack said Australia dodging of the worst of the global financial crisis didn't demonstrate that there's no housing bubble.

"I'm not persuaded by arguments that houses are sustainably priced; I'm not persuaded by the view that debt is not a problem; and I'm not persuaded that policy-makers could prevent collateral damage to banks," he said.

Read more on housing bubbles at The Australian.

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Halving of Bryon Bay coastal property land values a warning to other coastal property owners: Expert

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The New South Wales valuer-general has cut the price of pieces of land on a beachfront near Byron Bay by 50%, due to the dangers of coastal erosion.

But property expert and SQM Research founder Louis Christopher says the issue is not so much that properties have been stripped of their value, but how the market and local council will react to this new development in other areas.

The decision is the latest in a series of controversial decisions involving property owners on the Byron Bay coast, which has seen widespread protests against the Bryan Bay council.

"It's something that is a threat to certain coastal parts of Byron Bay, and in Northern Sydney as well. The issue is not so much that water is going to overcome and destroy these homes, but what the market is going to do to react to it."

The issue is that beachfront properties are at risk to rising sea levels, caused by gradual global warming. A number of storm surges have begun to erode the coast, putting these properties at risk.

A number of properties have actually been put up for sale, but very few buyers are attracted, and Christopher says this decision will only make that situation worse.

"This issue is going to get worse because now, everybody knows about it and it will spread to other areas. But it boils down to how councils are going to react, because it can make the situation a heck of a lot worse for homeowners or it can improve the situation through responsible planning."

Other markets, particularly in Queensland and Sydney, have the same erosion problem and Christopher says these decisions could spread.

There have been a number of battles between these costal property owners and the Byron Bay council. Late last year residents won the right to defend their properties against coastal erosion instead of being forced to abandon their homes, which is the proposal being pushed by the council if erosion becomes too dangerous.

Some analysts say properties could have even been affected by the council's decision to pursue that abandonment policy. "Some of the properties in Byron Bay have been affected by how the council has responded," Christopher says.

The new valuation will allow the council to determine what rates should be paid. But Christopher warns the Byron Bay market could be affected by any rash council decisions, such as pursuing the abandonment policy, and believes any decision must be carefully thought out.

"This is an issue in itself – how the council responds to this ongoing threat. In very draconian ways the council can destroy value, and we need to watch how that is ongoing."

The actual decision to strip the land's value was forecast by the valuer-general's office some time ago. This morning, a spokesperson told SmartCompany the decision to slash the land values was actually made several months ago, and ratepayers were told at the time.

"This is all part of a general process of revaluating properties, and this was actually forecast six months ago to ratepayers. They have known about this decision for six months."

Credit:Smart Company

Cruising the world's richest streets

Credit:Smart Company
There are plenty of property vendors around Australia who can sympathise with the corporate undertakers from insolvency firm PPB, who are trying to sort out the $1 billion collapse of coal and cattle baron Ric Stowe.

As residential markets around Australia cool, sellers are suddenly discovering that buyers are just that bit harder to find, and their cheque books are that bit harder to open.

That’s exactly the problem confronting Perth real estate agent Andrew Porteous. He’s been engaged by PPB to try and sell Ric Stowe's sprawling mansion Devereaux Farm, which has five separate houses, two pools and a chapel.

The pile has a price tag of about $68 million, but Porteous is struggling to find a buyer. Things have got so grim that he’s now talking about subdividing the property into 16 separate parcels in order to get the best return.

Porteous might be struggling to pull off what would be Australia’s most expensive ever house sale, but it would be wrong to think that Australia is in the middle of prestige property sales drought.

The last 12 months has seen price records set for home in Perth, Melbourne and Canberra, and a string of big sales in Sydney.

And this week came the news that confirms that Australia is holding its own in the prestige property world, with Sydney’s richest strip holding its place on the annual list of the world’s most expensive streets.

The list, compiled by website Financial News with some help from top-end real estate companies Knight Frank and Savills, has become something of a barometer of how the ultra-rich are travelling.

In 2009, the value of homes on the pricey strips fell by an average of 12% as the GFC rocked wealthy entrepreneurs all over the world.

This year, average values are down 15%, but a closer inspection of the list highlights the gap between the wealthy of the West (Europe and North America) and those of the East (Asia).

For example, topping this year’s list is Hong Kong’s Severn Road, where property has been valued at $US70,000 per square metre this year after valuations plunged to $US40,000 last year. Hong Kong’s property market is flying, spurred by booming wealth levels in mainland China. Last week, a development company paid a staggering $1.5 billion for a plot of land at prestigious Victoria Peak.

On the other side of the world, in beautiful France, luxury property prices are heading the other way. Chemin de Saint-Hospice, as 15-house street in Cap Ferrat, just east of Nice, fell from second on the list to fifth, after valuations tumbled 45%. Avenue Montaigne, which is in the heart of Paris’ 'Golden Triangle' of luxury addresses, has also seen valuations drop 40% to $US32,000 per square metre.

As well as the generally poor state of the European economy, commentators say the strength of the Euro over the last year has also been a deterrent for buyers.

Things have been better at two of the world’s best-known prestige strips, London’s Kensington Gardens (where prices have been steady at $US65,000 per square metre) and New York’s Fifth Avenue (where prices fell 10% to $US65,000).

The only other street to increase in value this year was Ostozhenka in Moscow, where prices increased 14% to $US40,000 per square metre.

Coming in again at number 10 on the list was Australia’s only entrant: Wolseley Road in the ritzy Sydney suburb of Point Piper, where prices were steady for the second consecutive year at $US28,000 per square metre.

The street, which is home to wealthy entrepreneurs including John Symond and Frank Lowy, is known as Australia’s premiere address thanks to its stunning harbour views.

The price tags are astronomical. Financial News says recruitment entrepreneur Andrew Banks listed his mansion earlier this year with an asking price of $US53 million, while a mansion owned by the late rich list members Peter and Ruth Simon was put on the sale block for $60 million last year (apparently it remains up for sale).

According to a recent list of the biggest sales in Sydney last financial year, published by the Sydney Morning Herald, Wolseley Road was home to the seventh biggest sale of 2009-10, with one home selling for a reported $11.9 million.

Tony Crabb, national head of research at Savills Australia, says conditions at the top end of Australia’s residential market – which he categorises as the $2 million-plus bracket – have recovered well since the GFC and are now stable.

“The top end of our residential market took a fair old beating at the height of the GFC and we saw drops as high as 30% in some areas,” Crabb says.

He says the big problem was margin calls, which forced wealthy entrepreneurs to offload equities and properties.

“As equity prices declined in 2008 and 2009, those top end suburbs were shattered, particularly in Sydney. There were sellers everywhere, and of course no buyers,” he says.

But things are now back to normal.

“The forced sellers have all been forced, and the market has rebounded and then some. We’re seeing normal trading conditions and there is depth in the market and a better balance between buyers and sellers,“ he says.

It’s a similar story in Brisbane, where buyers’ agent Scott McGeever of Property Searchers says the $1 million-plus segment of the market remains strong.

“The top end of the market is just not susceptible to interest rates,” he says.

“Those sort of marquee properties that people tend to pay the big money for always do well – properties that have fantastic views, big land and are close to the city.”

A string of recent mansion sales support the view that prestige property remains buoyant.

In November 2009, a Perth mansion belonging to billionaire mining heir Angela Bennett was sold for an Australian-record price of $57.5 million to Chris Ellison, founder and major shareholder in mining services company Mineral Resources.

In March, the Inge family set a Melbourne record when they sold a mansion in the up-market suburb of Toorak to property developer Harry Stamoulis for $25 million.

Even Canberra has seen a record price, when a businessman paid $7.3 million for a five-bedroom mansion in the suburb of Red Hill.

According to the SMH list, the top seller in Sydney last financial year was a three-level 'European-style' villa called Carrara, in the suburb of Vaucluse. It was offloaded by private equity investor Patrick Keenan and his wife Elizabeth for an estimated $26.75 million.

Of course, that is still well below the biggest ever sale recorded in Sydney, which was set back in 2008 when currency trader Ivan Ritossa and his wife paid $45 million for a Vaucluse mansion called Coolong.

However, that record may be tested this spring, when Point Piper mansion Altona, owned by Deke and Eve Miskin, is put up for sale with an asking price of $40-45 million.

Looking forward, Tony Crabb is confident the top end of the market will remain stable, providing share prices and company profits remain relatively strong.

“There certainly isn’t reluctance at the top end of the market. Consensus is that the economy is continuing to recover and gaining strength. There doesn’t seem to be anything on the horizon that would see that being de-railed,” he says.

He says a new mini mining boom and improving financial services profits could even see more buyers emerge.

Andrew Porteous and the insolvency experts trying to sell Ric Stowe’s Devereaux Farm certainly hope he is right.

Credit:Smart Company

Orpheus Island Resort expected to fetch $10m

Credit:The Wall Street Journal

AN island that has been a holiday destination for stars such as Elton John and Phil Collins is for sale.

The Orpheus Island Resort on the Great Barrier Reef has been placed on the market with price expectations of more than $10 million.

As well as John and Collins, it is understood Hollywood stars Mickey Rooney and Vivien Leigh, who starred in the 1939 Hollywood classic Gone With the Wind, have also stayed at the glamorous resort.

The island is 190km south of Cairns and 80km north of Townsville.

The 3ha resort is being sold with a 7ha elevated lot that has development potential.

The entire 1368ha island is mainly national park.

Paul Nyholt of CB Richard Ellis and Pat Kelly of Burgess Rawson are marketing the property, which was purchased about three years ago for $15m.

The resort is limited to 42 guests and includes 21 waterfront guest rooms, fully licensed bar and restaurant, gymnasium, tennis court, two swimming pools and guest facilities.

The property is being offered for sale through expressions of interest, which close on September 16.

Credit:The Wall Street Journal