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Australia’s property price surge set to take a breather in 2017

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HOUSE price growth is set to slow nationally this year as low inflation, weak wages growth and oversupply worries in some cities put the brakes on recent rises.

And the popular claim that home prices double every 10 years has become a myth, as a News Corp Australia analysis shows that only Sydney delivered on that promise in the past decade and forecasters say no city will grow this much in the coming 10 years.

From 10 per cent-plus growth in 2016, most independent forecasters expect home prices to rise about 5 per cent nationally as the likelihood of another Reserve Bank interest rate cut diminishes and hot markets in Sydney and Melbourne start to cool.

“We are expecting slower growth, in the region of three to five per cent,” said CommSec chief economist Craig James.

“However, we had underestimated the demand that was out there in 2016. The Sydney market still remains quite buoyant,” he said.

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Each city has its own property price cycle and different supply and demand issues. Sydney and Melbourne have boomed, Perth and Darwin dropped as the mining boom petered out, while other cities have been relatively flat.

“It’s basically been Sydney and Melbourne then daylight comes next,” Mr James said.

An analysis of Real Estate Institute of Australia data shows that Sydney’s house prices have surged exactly 100 per cent in the past decade, while its unit prices rose 95 per cent.

No other capital city saw prices double in the decade — Melbourne houses were next best (up 94 per cent), Darwin 57 per cent, Adelaide 51 per cent, Canberra 51 per cent, Brisbane 45 per cent, and Perth and Hobart 23 per cent.

Mr James said increasing supply — particularly in apartments in Sydney, Brisbane and Melbourne- should slow down price growth. “Across the country a lot of new buildings have been approved and are under construction. When wages are growing at 2.5 per cent it’s hard to sustain growth in home prices at these levels.”

Metropole Property Strategists CEO Michael Yardney said property markets would be fragmented in 2017 depending on local economic strength and supply and demand, with two-thirds of full time jobs likely to be created in Melbourne and Sydney to underpin continued outperformance there.

“The elephant in the room is the huge oversupply of new apartments being completed in Brisbane and Melbourne,” he said.

Most areas of Australia were unlikely to double in price over the next 10 years, Mr Yardney said.

“We’re now at a time of lower inflation, lower interest rates, lower economic growth and lower wages growth, so it’s likely we’ll have lower capital growth of property in the next decade,” he said.

However, some suburbs would outperform. “In the last five-year Census period, while overall wages growth in Australia was 20 per cent, some municipalities had 40 per cent wages growth. In general these were the gentrifying inner and middle ring suburbs where affluent owner occupiers with higher disposable income wanted to live and could afford to pay for the privilege of living there.”

 

 

Originally Published: http://www.goldcoastbulletin.com.au/

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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

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debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.

According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.

If that happens, it would also cause an economic “catastrophe”.

Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.

“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“That’s higher than any other country in the Western world by a long way.

“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.

“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

He said foreclosures had also risen by 600 per cent in the region.

“The mortgage stress is definitely being felt especially in this area,” he said.

60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.

What does a million dollars buy in Aussie capital cities?

debt bomb

Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.

“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.

But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.

One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.

Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.

And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.

That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.

“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.

Related article: Experts warn of ‘debt bomb’ as housing downturn worsens

Source: news.com.au

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Opinion

Australia’s best place to invest is here in Queensland

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Australia’s best place to invest is here in Queensland
Experts are hailing the Sunshine Coast as the best place in the nation to invest in property.

EXPERTS are hailing Queensland’s Sunshine Coast as the hottest place in the nation to invest in property right now.

A lack of housing, a tight rental market and a rapidly growing population mean supply is failing to keep up with demand in the region – creating perfect conditions for investors.

Leading real estate industry figure John McGrath said the Sunshine Coast presented one of the best opportunities for capital growth because of its liveability, affordability and future economic prospects.

Australia’s best place to invest is here in Queensland
Main Beach at Noosa is a popular attraction with both locals and tourists.

“From an investment point of view, where in Australia right now can you invest your dollar and get better returns than the Sunshine Coast or southeast Queensland?” Mr McGrath said.

” I don’t think there is a location that’s going to offer better investment growth in the future.”

His views are echoed by prestige property agent Tom Offermann of Tom Offermann Real Estate, who claims the Sunshine Coast “is on the cusp of the highest growth period in its history”.

“This is being driven by a raft of infrastructure projects that are delivering exceptional lifestyles, which in the past required some compromises for people coming from big cities,” Mr Offermann said.

The region is in the midst of an infrastructure boom, with billions of dollars being invested in upgrading and creating new facilities.

Work is underway on a new runway at the local airport, which is set to become international by 2020, and a new hospital and health precinct has recently been established.

“These are game changers,” Mr Offermann said.

“Astute property investors who recognise what is happening, and take action to secure the best located property they can afford, will reap the rewards of their foresight.”

Local agents say the region is crying out for more investment properties to cater to the needs of the increasing population.

According to demographer Bernard Salt, the Sunshine Coast’s population of around 298,000 residents is set to rise to 550,000 in 23 years, which will require more than 100,000 new homes to be built.

The latest Real Estate Institute of Queensland figures show the rental vacancy rate on the Sunshine Coast is just 1 per cent, with Caloundra having the tightest vacancy rate in the state at just 0.5 per cent.

Australia’s best place to invest is here in Queensland
Canal front homes on Noosa Sound. Photo: Lachie Millard.

It’s good news for investors, who are currently achieving healthy rental returns of around 5 per cent.

In its recent report, Herron Todd White noted an increase in investor activity in the Sunshine Coast market, with the sub $350,000 unit and townhouse sector particularly popular.

“It’s not uncommon to see townhouses selling for $220,000 attracting a rental of $280 per week – over 6.5 per cent gross return,” the report said.

For investors looking to capitalise on the growth in the region, McGrath Real Estate founder John McGrath said now was the time to get into the market.

“I think there is a great opportunity, in particular right now, because we’ve seen Sydney and Melbourne have shown unprecedented growth over the last five or six years,” he said.

“Now those markets have come to a plateau and a lot of people are going to be saying; ‘Do we take our profits and reinvest them, or, in fact, do we move up north and get better value for money?’

“So, I think right now there’s a terrific window of opportunity where people can capitalise on the immense growth we’ve seen in the southern states.”

Australia’s best place to invest is here in Queensland
John McGrath, founder of McGrath Estate Agents.

Reed & Co director Adrian Reed the increased international access the new airport would provide would likely change the profile of buyers in the Noosa region.

“We’re currently seeing an increase in Australian expats buying back into the market, but if accessibility becomes easier, we’re expecting a more aggressive upward trend in high-end premium property,” Mr Reed said.

Australia’s best place to invest is here in Queensland
Aerial image over Sunshine Coast Airport. Photo: Lachie Millard.

He said that lending restrictions and the impact of the banking royal commission had had little impact on the region’s prestige market.

“The vast majority of deals I’m doing at the top end of the market are cash,” he said.

“They’re self funded retirees who’ve already sold their principal place of residence.”

Owner/builder Paul Saunderson, who is selling his home in Noosa Heads through Peter TeWhata of Tom Offermann Real Estate, said the local market was “out of control at the moment”.

“There are houses getting knocked down and new dwellings being built everywhere,” Mr Saunderson said.

He said the contemporary, four-bedroom, three-bathroom property at 20 Sanctuary Ave, Noosa Heads, which he lived in with his wife and two children, was attracting strong interest from interstate and overseas investors.

Australia’s best place to invest is here in QueenslandThis home at 20 Sanctuary Ave, Noosa Heads, is for sale.

“It’s a good investment opportunity because it’s been valued as holiday letting, which is anywhere from $6000 to $10,000 a week during peak season,” Mr Saunderson said.

Jamie Smith of Century 21 On Duporth in Maroochydore said he’d never seen so much activity in the Sunshine Coast property market, with strong interest from both local and interstate investors.

Mr Smith said many investors were looking to buy in the less expensive suburbs, where new housing developments were popping up, such as Caloundra, Sippy Downs, Birtinya and Mountain Creek.

“It’s definitely unprecedented in terms of what we’re seeing on the Coast,” he said.

Australia’s best place to invest is here in Queensland
The Sunshine Coast University Hospital’s emergency department. Picture: Jono Searle.

But Mr Smith said investors who were not already in the market needed to act fast.

“If you were here three years ago, you could have bought between $400,000 and $500,000,” he said.

“Now you’re looking at anywhere from $600,000 plus, so it’s definitely changed a little bit.”

SUNSHINE COAST SUBURBS FOR BEST CAPITAL GROWTH

Suburb Property type Median price 12 month change in price

Minyama House $1.31m 45.8%

Kenilworth House $399,000 40%

Yandina Creek House $820,000 32.3%

Beerwah Unit $375,000 25%

Mount Coolum House $676,200 23.2%

Mapleton House $543,250 21.3%

Mudjimba House $739,500 20.7%

Peregian Springs Unit $475,200 18.8%

Battery Hill House $579,500 18.4%

Montville House $707,500 17.9%

(Source: CoreLogic)

Australia’s best place to invest is here in Queensland
An artist’s impression of the Sunshine Coast Airport Expansion project.

Source: www.ipswichadvertiser.com.au

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Opinion

Queensland is the next property hotspot, experts say

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Queensland is the next property hotspot, experts say

As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.

According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.

Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.

Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.

The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.

The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.

NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.

“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.

Source: brisbaneinvestor.com.au

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