The Australian Bureau of Statistics released its March 2010 Property Price Index this week and an astonishing 20.0% average growth was reported across Australia for the 12 months to 31 March 2010.
Melbourne headed the pack achieving 27.7% followed by Sydney boasting 21.0% and Canberra only a whisker behind with 20.6% year on year growth. All other capital cities still reported double digit growth.
With the global credit crunch all but over in Australia, there has been such pent up demand, and so little built over the past 3 years that growth of this magnitude was inevitable. The long term growth of Australian property is historically between 7 – 10%. So in other words for ever year that values appreciate 20%, there will be other times in the 7 year cycle when returns will be less generous.
Asked when is the best time to buy one senior analyst at accounting firm PWC stated that “those that bought over the last 12 months, and those that continue to buy within the next quarter will rubbing their hands with glee in 5 years time”. This sentiment is now also widely echoed throughout the Australian financial newspapers and journals.
Under riding this demand is a combination of record population growth and increasing consumer confidence. In his media release of 4 May 2010, the governor of the Reserve Bank of Australia Glenn Stevens stated, “Credit... for housing has been expanding at a solid pace” and then went on to say “....the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months”. This was instrumental in his decision to raise the cash rate by a further 25 basis points to 4.50%.
Governor Stevens further stated that “rates for most borrowers will be [returning to] around average levels”.
With first home buyers tapering out of the market (either due to the reduction in First Home Buyer grants, or due to actual appreciation in values), this void has been filled somewhat by investors. One observer noted that “it appears the baby boomer generation of mum and dad investors are out pricing first home buyers”. Thus implying that the traditional acquisitions of both are quite similar.
Although the level of value buying diminished about as quickly as an ice cream on a summers day, for those that are willing to look, there still exist some excellent investment opportunities out there. Especially in relation to off-the-plan projects as the level of construction returns to pre GFC levels, but the developers level of financing hasn’t.
When combined with various state stamp duty concessions (such as New South Wales 50% exception for new properties under $600,000*, or the reduced duty on off-the-plan’s in Victoria), “the biggest mistake you can make, is not to buy anything”, Chairman of SMATS Group Steve Douglas commented.
*The 50% stamp duty exemption expires 30June 2010.
