A recession is technically defined as two consecutive quarters of negative economic growth. As the above chart highlights Australia hasn’t recorded a recession since the June 1991 quarter (the recession we had to have according to Paul Keating). Over the past 20 years, the average annual rate of economic growth has been recorded at 3.4%, as you can see economic growth is currently more than a full percentage point below this 20 year trend. In fact, the annual rate of economic growth has consistently been below this trend level since the December 2007 quarter, four years ago and right before the onset of the Global Financial Crisis (GFC).

One of the many reasons why economic growth has been slower since the onset of the GFC can be attributed to the increase in the household savings ratio. The latest data shows that the household savings ratio is currently sitting at 9.0% and although the ratio has eased somewhat in recent quarters it remains at much higher levels than what has been recorded over recent years. Over the past 20 years, the household savings ratio has been averaged 4.5% indicating that current household savings levels are double the long-term average. As mentioned, economic growth has been below average since the December 2007 quarter and since the December 2007 quarter, the household savings ratio has averaged a much higher 8.8%.

Obviously, there are many other factors that impact economic growth however, if households are saving money rather than spending money there is a flow on effect right across the economy; lower demand for retail and manufactured goods and lower demand for housing (purchase and construction). The table below highlights how certain industries have really felt the effects of the slowdown since the onset of the GFC and subsequently since Australian’s started saving more. Although certain industries have shown very low levels of expansion over the period, others – more essential sectors of the economy – have continued to expand.

Overall, less spending by Australian households has flow on affects right across the economy. It also appears that a greater level of saving is a direct contributor to lower levels of economic growth. There are other factors to consider such as the higher Australian dollar and the weakness emanating out of other international economies to consider as to why economic growth has been slower. In stating this, it appears that industries such as accommodation and food services, manufacturing, real estate and retail are likely to continue to underperform until such time as Australian consumers once again show a preparedness to spend their disposable income.

Recent forecasts from the Reserve Bank within their latest Statement on Monetary Policy suggested that annual GDP over the December 11 quarter would be 2.75%, higher than the 2.3% recorded. Their forecasts also show that they expect that GDP will grow between 3% and 4% on an annual basis to the June 2014 quarter. Given that their recent forecasts have been a little high and they have commented that the Australian economy is growing at a trend rate (when it hasn’t been) we’d like to find out from you how you think Australia’s economy will perform over the next few years.

By RPDATA

Anyone can phone the hotline to report graffiti in NSW and callers can remain anonymous if they are concerned for their privacy and safety,” Mr Fraser said.

“After receiving a report, hotline operators will send the information to the Government agency or local council responsible for cleaning it up.”

Mr Fraser ridiculed the notion that taggers and others who deface property without permission were “artists”.

“They might like to think of themselves as artists, but they are really vandals who show no respect for other people’s property,” Mr Fraser said.

Mr Fraser said the hotline delivered on an election promise and would form a key part of the NSW Government’s strategy to reduce the impact of graffiti on local communities.

The O’Farrell Government has also funded clean-up squads run by Rotary and other community groups and is working with local councils on reducing graffiti.

“Each year, graffiti attacks cost the state more than $100 million, and State Rail alone spends more than $50 million alone cleaning up trains,” Mr Fraser said.

“This is money the Government would prefer to be spending on our schools, libraries and roads.

“Graffiti is a scourge on our community and the cause of great anger for people who take pride in their surroundings.”

The Graffiti Hotline will also help authorities focus on locations that most often under attack

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

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.”