Western suburbs best bets for Sydney investors in 2012
The best property bets for Sydney property in 2012 would be most areas in the western suburbs, according to valuer Herron Todd White.
“This segment of the market should see steady capital growth and strong rental returns throughout the year,” the group has forecast.
“Best bets for 2012 would be most areas in the west at the lower to middle end of the market.
“We are seeing signs that small investors are continuing to return to the market in good numbers, looking to take advantage of strong rental returns in areas such as Mount Druitt.”
The valuer suggests new property investors had been “possibly spooked by the stock market fluctuations of late 2011”.
HTW says it is difficult to predict how things will progress as 2011 threw up plenty of challenges with the continuing resources boom counterbalancing poor economic global performance and some lack of business confidence.
“The challenge is trying to see through the macro and micro indicators and come up with a balanced view on how residential will perform this year.
“It seems that good local knowledge of each market’s different sectors is vital.
“The big picture view and blanket statements can prove all too general in a market like this current one.”
It noted The Hills acreage/prestige market appeared as though it would remain quite stagnant with negative growth a possibility through 2012, “so probably one to avoid”.
A major problem pinpointed for the Sydney market was how prospective purchasers react to the changes to the stamp duty exemption.
“This may price out first home buyers who fuel the market in the south west suburbs.”
It noted the upper range of the market had already stalled with very few high end properties selling in the last six months.
“The unemployment rate will also cause some effect,” the report notes.
Local agents in Western Sydney believe immigration is another possible reason for increase in property values, with areas surrounding Auburn and Parramatta remaining popular.
“With cheaper prices and a central location, foreign purchasers have kept the market strong and is predicted to continually grow in 2012,” HTW notes.
In Liverpool and Fairfield areas, the upper range had slowed, however, the properties under the median prices were selling quite well and are also expected to continue in 2012.
The Bankstown and Liverpool areas are envisaged to have “good buys” in 2012, with unit prices approximately $200,000 to $250,000, providing a good rental return of approximately $300-$340 to per week, which would represent a solid net yield.
The report notes the big influences looming for 2012 on eastern suburb property markets were largely dependent on the current economic climate in the US and Europe.
“As a result high end markets such as the eastern suburbs will be worst affected if the predicted white collar recession eventuates,” HTW notes.
“The coming year will still present opportunities in the lower to mid range Eastern Suburbs, as well as mid range dwellings in the Botany Bay, Leichhardt and Marrickville LGAs.”
The expectations in north-west Sydney were generally “pretty positive: with the residential market expected to remain fairly steady”.
The report noted the area was still growing at a fairly rapid rate with major land subdivisions and new estates in the Hills/Blacktown area (The Ponds, Rouse Hill, Ropes Crossing, Bunya Estate at Doonside) and Penrith (Jordan Springs, Waterside development at Cranebrook, Glenmore Park and Claremont Meadows).
In the southern suburbs the report noted the proposed Sharks residential/commercial development at Woolooware as one watch along with work on the light rail extension through the inner west, as another significant property price shaping event.
By Jonathan Chancellor
Friday, 03 February 2012
Sydney’s housing pushes ahead while other markets remain soft
The preliminary capital city dwelling value index result for December was -0.2% (s.a.) following an upwardly revised +0.4% rise in dwelling values in November (was +0.1%). Revised regional house values for November increased from +0.3% to +0.5%. Sydney housing has been the nation’s best performer with dwelling values up 0.4% in December and by 0.7% over the quarter (s.a.).
In the generally seasonally weak month of December, the preliminary RP Data-Rismark Home Value Index result for capital city dwelling values was -0.2 per cent (s.a.). Low sales volumes in December mean that this number will likely see a more significant revision than normal.
The November result from the RP Data-Rismark index for dwellings in capital cities has revised up from +0.1 per cent (s.a.) to +0.4 per cent (s.a.) based on additional sales information. This marks the largest month-on-month improvement in Australian home values since May 2010.
The RP Data-Rismark ‘rest-of-state’ index, which covers Australia’s regional markets, has also revised up in November from +0.3 per cent to +0.5 per cent (s.a.). This is the most significant increase in regional house values since November 2010.
Over the December quarter, Australia’s capital city home values declined by -0.5 per cent (s.a.).
RP Data’s director of research Tim Lawless, said, “The December quarter was the year’s smallest quarterly decline. According to our index, capital city home values fell by -1.5 per cent (s.a.) in the March quarter, and by a further -0.8 per cent (s.a.) in each of the June and September quarters. This rate of decline had decelerated to -0.5% by the final quarter of 2011.”
In 2011, Australian capital city dwelling values experienced a capital loss of about three and a half per cent. Regional house values fared a little better, correcting by around three per cent. This compared to the 14-15 per cent decline in Australian shares. Adding in rents, the gross total return to Australian property investors was slightly less than one per cent over 2011.
Rismark’s managing director Ben Skilbeck said, “The month of December is characterised by a significant lull in activity and the preliminary index results have likely been influenced by some more volatile Melbourne and Perth estimates. We expect to get better clarity on the monthly movements as more information is reported.”
“Sydney currently has the largest volume of reported sales in December. In seasonally-adjusted terms, Sydney dwelling values rose by 0.4 per cent in the month of December. In the December quarter, Sydney dwelling values are up a total of 0.7 per cent (s.a.)” Mr Skilbeck said.
RP Data’s Tim Lawless observed that rental markets continued to strengthen in December.
“Weekly rents across the capital cities were up 1.0 per cent over the December quarter and are now 6.3 per cent higher than at the same time last year.”
“These higher rental rates combined with the slide in property values have improved investors’ yields. The average capital city dwelling is now offering a gross rental return of 4.6 per cent after a consistent trend upwards since mid-2010 when the typical capital city dwelling was yielding just 4.1 per cent. Darwin and Canberra are the highest yielding locations for property investors while Hobart, Brisbane, and Sydney provide gross yields that are better than average,” Mr Lawless said.
On the outlook for the year ahead, Rismark’s Ben Skilbeck commented, “We expect that the RBA’s interest rate cuts in the final two months of 2011 will lend further momentum to housing activity as transaction volumes pick up over February and March after the seasonally slow months of December and January. If financial market pricing for substantial additional RBA rate cuts proves accurate, we could see a stronger-than-expected bounce-back in housing conditions.”
“Housing affordability in Australia has experienced a striking improvement in recent times. While disposable household incomes on a per household basis rose by five per cent over the year to September 2011, Australian dwelling values have declined by 3.4 per cent since September 2010. As a result of the RBA’s rate cuts borrowers can now get fixed- and variable-rate home loans as low as 5.9 per cent and 6.14 per cent. Rismark’s research shows that disposable incomes per household have risen about 15 per cent further than Australian dwelling values since the end of 2003. This helps account for the decline in Rismark’s national dwelling price-to-income ratio, which is as low as its been since 2003” Mr Skilbeck said.
RP Data’s Tim Lawless added, “While global uncertainty and a stagnant local labour market could weigh on the consumer’s mindset, we are nevertheless observing improvements in monthly housing finance commitments. RP Data’s leading indicators on average selling times and vendor discounts are also starting to look healthier. There is no doubt that additional interest rate relief in 2012 would afford a very welcome cushion to the housing market.”
Rate cut triggers first rise in home values since December ’10
Rate cut triggers first rise in home values since December ’10
30 December 2011
RP Data-Rismark Home Value Index Release
In seasonally-adjusted terms, Australia’s capital city home values rose by 0.1 per cent in November, which was the first increase since December 2010. Regional house values recorded a 0.3 per cent (s.a.) rise in November, which was also the biggest increase since December 2010.
Based on around 312,000 sales over the first 11 months of 2011, the market-leading RP Data-Rismark Home Value Index recorded increases in home values across both capital city and regional markets in the month of November following the RBA’s decision to cut interest rates by 0.25 percentage points.
In seasonally-adjusted terms, capital city home values ground-out a modest 0.1 per cent gain (-0.2 per cent raw) in November. House values across Australia’s non-capital city or ‘regional’ markets, which account for about 40 per cent of all homes by number, also rose by 0.3 per cent in seasonally adjusted terms (-0.1 per cent raw).
Rismark’s director, Christopher Joye, commented, “For Australia’s capital city and regional markets, this was the single best monthly result since December 2010, and augurs well for housing activity during the first quarter of 2012, which we project will rebound solidly. The best proxy for housing demand—the number of new home loans approved for purchasing established properties—has risen robustly every month since its nadir in March.”
The November result has helped improve the Australian housing market’s year-to-date performance. Whereas in October RP Data-Rismark reported that capital city dwelling values had declined by four per cent in the first 10 months of 2011, the November year-to-date index change is now just -3.7 per cent (seasonally-adjusted). In actual raw terms, Australian capital city dwelling values have only declined by -2.8 per cent in the first 11 months of 2011.
Regional markets have performed even better. Over the year to November 2011, regional house values are only off by -2.6 per cent in raw terms (or -2.8 per cent seasonally-adjusted). Including gross rents, the total return realised by investors in capital city property remained positive in 2011 at +1.2 per cent.
According to RP Data’s Senior Research Analyst, Cameron Kusher, there remains significant diversity across capital city housing markets.
“Although home values have fallen across each capital city, Sydney and Canberra have been the most resilient with dwelling values off just -0.5 per cent (s.a.) and -1.6 per cent (s.a.) over the year, respectively” Mr Kusher said.
He continued, “On the other hand, Brisbane and Melbourne home values have recorded total declines of -7.0 per cent (s.a.) and -5.6 per cent (s.a.), respectively.”
“In the month of November, Sydney, Melbourne, Perth and Canberra produced flat-to-positive capital gains following the RBA rate cut. In contrast, home values in Adelaide, Brisbane and Darwin softened further,” Mr Kusher said.
Rismark director, Christopher Joye added, “The November result is consistent with our forecasts that Australia’s housing market will respond much more quickly to the RBA’s November and December cuts than many analysts expect. Over 90 per cent of all Australian home loans are fully variable rate, and lenders have passed on most of the 0.50 percentage points worth of RBA rate cuts during the final two months of the year. Borrowers can now get fixed-rate loans for around 5.9 per cent and discounted variable rate loans as low as 6.14 per cent. As Australia’s most interest rate sensitive sector, the housing market will be one of the biggest beneficiaries of the RBA’s munificence alongside consumer spending. We expect to see house prices rising again in 2012.”
Reserve Bank Interest Rate drop
December 6th 2011, The Reserve Bank of Australia dropped the cash rate 25 basis points to 4.25% today. This follows the RBA’s decision to reduce the cash rate from 4.75% to 4.5% on Melbourne Cup Day in October, the first rate cut in two years and the first time since February 2009 that the RBA has made back-to-back rate cuts. 2012 is shaping up very well for property.