Investa Solutions Blog

Australia dodges recession bullet

2009-06-02T20:26:00.000-07:00

By business editor Peter Ryan

http://www.abc.net.au/news/stories/2009/06/03/2588048.htm

No recession: The economy continued to inch forward in the March quarter (ABC News: Giulio Saggin, file photos)

Australia has dodged an official recession, according to official growth figures out today.

The Australian Bureau of Statistics (ABS) says the economy grew 0.4 per cent seasonally-adjusted in the first three months of this year, defying earlier expectations that a contraction was close to certain.

The surprise result means Australia has escaped two consecutive quarters of economic contraction - the definition used by some economists for a technical recession.

The recession speculation began earlier this year when figures for December quarter GDP came in at a revised -0.6 per cent.

However, while the economy has avoided the technical definition of a recession, most economists believe rising unemployment (projected to be 8.5 per cent in 2010/11) means a recession is well underway.

Economists began rewriting their GDP forecasts after yesterday's balance of payments figures showed a surprise surge in exports could add 2.2 per cent to economic growth.

Today's surprise outcome means Australia has defied a global downturn which has swamped the US, UK and Japan. The US economy contracted by around 1.6 per cent in the first quarter, Canada by 1.4 per cent, Germany 3.8 per cent and Japan 4.0 per cent.

The median estimate of economists has been for a 0.2 per cent growth decline in Australia.

The Australian dollar firmed on the news and was trading at 82.3 US cents at 11:43 AEST.

The unexpected strength in the economy has also added to the case against further interest rate cuts despite dovish comments yesterday from the Reserve Bank.

TD Securities senior strategist Annette Beacher said the growth result was less of a surprise given yesterday's unexpected surge in exports which was the best trade performance in 48 years.

"I suppose what would be the disappointing aspect is that the headline will be that Australia has avoided a technical recession," Ms Beacher said.

"However, if you net out the last three quarters of GDP, in fact Australia has gone sideways for the best part of a year.

"So while it looks like we've avoided a technical recession, from a growth perspective we've gone absolutely nowhere since September last year."

Michael Blythe, chief economist at the Commonwealth Bank, agrees.

"This reflects the strength of consumption in the first quarter, helped by the Government stimulus packages and the net exports gain also contributing strongly," he said.

"But really the investment side of the economy is still very weak. We still see fairly weak conditions in the economy. We don't see a return to trend growth until late this year, early 2010."

Tags: business-economics-and-finance, economic-trends, international-financial-crisis, australia

Superannuation out, property in

2009-05-17T17:37:00.000-07:00

May 16th, 2009

INDUSTRY identity Andrew Bell believes the Gold Coast property market is likely to benefit on a range of fronts as a result of the Federal Budget released by the Rudd Government this week.

Mr Bell, CEO of the Ray White Surfers Paradise Group, said the first home buyer market would continue as one of the most active segments on the Gold Coast with the extension of the First Home Owners Grant.

However, Mr Bell said changes in tax benefits for high income-earners and cuts to superannuation concessions would also spur direct investment in the property sector.

"The superannuation changes, which include a temporary cut to the Government's co-contribution payment, and a permanent reduction in the concessions on super contributions, will make the safety of property investment a more attractive investment proposition," he said.

"The cap on salary sacrificing into super has been halved which, fundamentally speaking, means a greater tax rate on sums that would usually gone into a super fund, creating less incentive for investment in superannuation funds.

"I'd expect to see an increase in property investment from people looking to allocate money, that would have normally been contributed as part of a managed super fund, into the traditional bricks and mortar class instead, and use negative gearing as a means to offset tax.

"The long-term price growth of property will make this a more attractive proposition than leaving money at the whim of future federal governments who could change the super laws at any stage.

"Not only will super fund property investments allow for high returns through capital growth, but they will enable funds to be bolstered by rental returns.

"The security of bricks and mortar is becoming more and more attractive, particularly considering sharemarket volatility, the low interest rates, and now significant changes to tax and superannuation policies.

"Rents are rising, returns are solid, we have a housing shortage in Australia, and we are at -- or close to -- the bottom of the cycle, making it a very good time to get into the market."

Mr Bell said that the construction industry would also be a key beneficiary of the extension to the home owners boost.

"It will be a solid start to the new financial year for the construction industry as the somewhat slumping sector rides a continual wave of first home buyer demand," said Mr Bell.

"The fact that the boost will be phased out over the next six months will prevent any major or immediate disruptions to the lower-end of the market, which has accounted for a significant increase in buying activity in the past 12 months.

"However in saying that, demand won't stop in its tracks once the boost concludes. Buyers are still aware that now is the time to act and, if they have the ability to do so, they will, regardless of whether the boost is available."

http://www.goldcoast.com.au/article/2009/05/16/78815_gold-coast-real-estate.html

House sales surge on back of grants

2009-05-17T17:33:00.000-07:00

Josh Gordon
May 17, 2009

FIRST home buyers are continuing to pile into the housing market in the race to take advantage of the Federal Government's first home owners grant boost, despite clouds of gloom hanging over the economy and rising prices in Melbourne's most affordable suburbs.

The news came as Melbourne's auction clearance rate surged this week to its highest level since the end of the 2007 property boom.

The Real Estate Institute of Victoria said that 82 per cent of the 434 properties up for auction sold, an increase of six percentage points in just one week.

It's the first time since December 2007 that the clearance rate has risen above 80 per cent on a non-holiday weekend, when stocks are unusually low. At the same time last year, just 64 per cent of properties sold.

Meanwhile, new figures released yesterday by Housing Minister Tanya Plibersek show that since October last year, when the extended grant was unveiled as part of the Rudd Government's plans to stimulate the economy, 12,196 Victorian first home buyers have accessed the grant.

That represents a disproportionately small 20.5 per cent share of the 59,418 grants handed out nationally, with NSW receiving a 34.5 per cent share and Queensland a 22.2 per cent share.

Figures from the Bureau of Statistics show that first home buyers made up 27.3 per cent of home loans for owner occupiers in March — a record proportion.

But the grant could carry a sting in the tail for aspiring home owners. As reported in The Sunday Age earlier this month, housing prices have increased by at least $7000 in more than half the lower-priced suburbs since the grant was boosted in October.

The figures, from Residex, show that 57 per cent of suburbs with average house values below $350,000 experienced a price increase of more than $7000.

REIV chief executive Enzo Raimondo said it was clear that the 49-year low in the interest rate and government assistance to first home buyers was helping restore confidence in Melbourne's property market.

The strong result is also being attributed to the historically low number of properties going under the hammer, half the supply level last year and more than a quarter less than the record low set in 2004.

"There's just not enough stock to match up with number of people that are now out in the market," said Scott McElroy, director of the Hocking Stuart agency. "Demand is outstripping supply because (vendors) are still hanging back."

With CHRIS VEDELAGO

www.theage.com.au

Home grant rush props up property

2009-05-17T16:57:00.000-07:00

By Sanna Trad

The Australian

May 18, 2009 12:00am

FIRST home buyers flocked to the market at the weekend following the Rudd Government's decision to extend their boosted grant.

Despite warnings from property market experts that the increased grant had artificially inflated prices at the lower end of the market, hundreds of first home buyers eager to enter the market boosted auction clearance rates across the nation, The Australian reports.

Australian Property Monitors head of research Yvonne Chan said first home buyers were holding up the property market.

"Clearance rates have been consistently at a high level for the last few months and it's been driven by first home buyers," she said.

At the weekend, auction clearance rates remained strong in the major markets, with Melbourne recording a rate of more than 70 per cent for the third week in a row.

The clearance rate of 71 per cent was 14 points higher than the figure recorded for the same weekend last year and the same as the previous weekend.

n Sydney the clearance rate was 66 per cent, the same as the previous weekend and 17 points higher than the corresponding weekend last year.

The boosted grant was extended to September 30 in last week's budget. After the deadline, the grants will be reduced from $14,000 to $10,500 for existing homes and from $21,000 to $14,000 for new homes until the end of the year.

SQM research director Louis Christopher said first home buyer demand would start to dry up by the third quarter.

Technorati

2009-05-04T18:31:00.001-07:00

Technorati Profile

Affordable houses lure buyers into South Australia

2009-05-03T18:05:00.000-07:00

HANNAH SILVERMAN, REAL ESTATE REPORTER

May 01, 2009 09:25pm

SOUTH Australia's affordable property market is reeling in international and interstate buyers.

Real estate agents have observed an increase in inquiries from prospective buyers since the start of the year who want to cash in on SA's cheaper housing prices.

Figures from RP Data showed Adelaide houses were the most affordable of all mainland capital cities, selling in March for a median price of $410,442.

Sydney is the least affordable with a median house price of $565,928.

Raine & Horne state manager Kevin Magee said affordability was the main reason buyers were showing interest in SA.

"International and interstate interest is definitely increasing," he said. "SA is recognised as probably the most insulated state in the one of the most insulated countries in the world against the financial crisis.

"People mock the state but the reality is we're gaining on the eastern states in terms of our growth attraction and property values."

Toop & Toop recorded most online interest in April came from the UK, followed by the U.S. and China.

Real Estate Institute of SA president Robin Turner said the state was attractive because of its long-term stability and undersupply of rental properties.

Jon and Sarah Tyler bought their first home in Willunga after migrating to SA from the UK. "We wanted a lifestyle change and we like the way it is here . . . it's more affordable and it's not a rat race," Mr Tyler said.

http://www.news.com.au/adelaidenow/story/0,,25415852-2682,00.html

Property Value Index Release

2009-04-30T19:00:00.000-07:00

Residential Property Values Bounce Back in March Quarter ‘09

Australia’s housing market has continued to defy the sceptics during the first quarter of 2009 with the indicative capital city RP Data‐Rismark National Dwelling Value Index up 1.6 per cent in the three months to end March 2009. (This result compares the monthly index values at end March 2009 with end December 2008.) Most of the growth in residential property values has come in February (+0.9 per cent) and the March indicative estimates (+0.6 per cent). The month of January was flat.

Australia’s residential property market has proven to be consistently resilient and follows on from modest circa 3 per cent falls in the value of capital city homes during 2008, which was primarily a result of mortgage rates peaking at 9.6 per cent in August 2008.

By comparison, the ASX All Ordinaries Accumulation Index fell in value by ‐31 per cent over the 12 months to end March 2009 while the Listed Property Trust Accumulation Index fell by ‐58 per cent.

RP Data/Rismark International confirmed that improvements in housing affordability are central to what appears to be the start of a slow house price recovery.

According to Christopher Joye, Managing Director of Rismark International, “This gradual recovery in Australian house prices has been driven by the 40 per cent fall in home loan rates to 5.7 per cent, which are now at their lowest levels since July 1968.”

"The ratio of total household interest payments to disposable income has fallen rapidly from 15 per cent to 10 per cent as a consequence.

“Consumers are also voluntarily deleveraging through higher levels of savings with Australia's household savings rate now at its highest level since the late 1980s. This augurs well for the ability of future home buyers to service their debt.”

According to Tim Lawless, RP Data’s Director of Research, the stabilisation in the Australian residential housing market should be viewed as a positive sign by the construction sector.

“These results represent good news for the building industry and should provide a boost to developer confidence,” he said.

“As the market improves further we would expect the construction industry to ramp up new dwelling commencements in a much needed attempt to remedy Australia's large housing shortage.”

“A lift in construction activity will certainly have a positive effect on the economy by boosting jobs, incomes, demand for building products and services, and retail sales for home appliances and furnishings,” Mr Lawless said.

However, Mr Lawless does have some concerns about current government charges and levies; he believes these still present a major hurdle to a wholesale recovery in the construction sector.

There have also been some misplaced concerns that the boost to the First Home Buyers Grant has artificially driven price growth across the entire housing market.

“While the Grant has certainly helped spark demand, the key driver of the housing market’s resilience has been the fall in mortgage rates to 40 year lows. It is important to remember that first-time buyers represent less than 30 per cent of all property sales.” Mr Lawless said.

In addition, he said that in many of the mortgage belt markets where first home buyer sales are now occurring there had been a level of underperformance with both real and nominal house price falls recorded between 2004 and 2008. This was particularly true in the western suburbs of Sydney.

“Price growth in these areas in 2009 is likely to be a welcome change for existing owners,” Mr Lawless said.

CLARIFICATION: On a quarterly basis (i.e., comparing the first quarter of 2009 with the fourth quarter of 2008), which is the method used by the ABS, Australian residential property values are up 0.1 per cent according to the quarterly RP Data-Rismark Hedonic Index. Quarterly index estimates are ‘transaction-weighted’. Since January currently has the largest number of sales (given the delays in getting 100 per cent of sales for February and March), January has a higher weight in the quarterly index and therefore puts a downward bias on the results (since January was flat). Consequently, a monthly index gives more accurate estimates of changes in residential property values over time.

City by City

Sydney
The quarterly data reveals Sydney is now one of the best performing capital cities in terms of value growth, with houses up 2.4 per cent in value and units up 2.5 per cent over the first three months of 2009. A return to modest growth has been a long-time coming for Australia’s largest city. In fact, housing values are still $16,000 lower now than they were back at the 2004 peak highlighting the lackluster performance of the last four years. Rental yields in Sydney are now the third highest in the nation after Darwin and Canberra. The improvement in rental yields is due to several successive years of strong rental growth coupled with relatively flat property values resulting in improved rental returns for landlords.

Melbourne
Over the last quarter Melbourne has been the third best performing capital city in terms of improvement in the median dwelling value. House values have risen 2.3 per cent and unit values have risen 2.8 per cent over the first three months of the year. Melbourne also stands out as recording the shortest average time on market for houses, with the average house selling in just 41 days compared to the national average of 55 days.

Brisbane
The slowdown during 2008 hit Brisbane harder than many other capital cities, which is largely due to prices perhaps overshooting the mark in ’07. Brisbane had a stellar run in 2007 with dwelling values increasing by 25 per cent over the calendar year – the highest annual rate of growth of any capital city during that period. Over the last 12 months Brisbane residential values have fallen 3.4 per cent across both the houses and units market. Modest growth has returned to the Brisbane market during 2009 with the first three months of year seeing house values up 1.4 per cent and unit values up 0.4 per cent. Rental returns are approximately on par with the national average with houses providing a gross yield of 4.7 per cent and units 5.4 per cent.

Adelaide
The Adelaide market has slowed considerably after a prolonged run of price growth which started in early 2007 and didn’t end until half way through 2008. Housing values in Adelaide increased by 24.3 per cent during the 2007 calendar year. Over the last quarter Adelaide values have slipped by -0.3 per cent due mainly to falls in house values (down 0.5 per cent) rather than unit values (up 0.4 per cent). Houses and units are averaging 81 days and 73 days to sell respectively, the longest average selling time of any mainland capital city.

Perth
Perth dwelling values peaked in September 2007 at $507,000 and have since declined by 8.1 per cent or just over $41,000. Values are still falling in the Western capital; however the rate of decline has eased during 2009. Over the March quarter house and unit values fell by -0.7 per cent; a far cry from 2.7 per cent quarterly fall recorded over the three months ending October last year. Rental yields in Perth have been improving month on month also, with the average gross yields on a Perth house now higher than the national average (4.7 per cent v 4.6 per cent).

Darwin
Darwin property values have been the standout performers, recording consistent improvements quarter on quarter since late 2004. Over the last 12 months Darwin is the only capital city to record an increase in housing values, with house values up 6.7 per cent and unit values up 13.6 per cent over the 12 months to March 09. Such strong capital growth typically erodes rental yields, as rental rates rarely move this fast, however in the case of Darwin the rental market has moved in parallel with housing values, consistently providing the best rental yields of any capital city. Over the March quarter the average house and unit was providing a gross rental yield of 6.3 per cent.

Canberra
Canberra dwelling values have fallen -2.7 per cent over the 12 months to March 2009, with a bounce back over the first quarter of 1.4 per cent. House values were up 1.3 per cent over the first three months of ‘09 and unit values were up by 1.7 per cent. Canberra is recording the second highest rental yields in the nation after Darwin, with houses returning a gross yield of 5.6 per cent and units returning a gross yield of 6.1 per cent.

Ends. Detailed tables available in the PDF.

NOTE:

*RP Data and Rismark recommends that caution be used when interpreting property indices results as these results can
vary depending on the methodology used and sample size.

In all RP Data and Rismark published indices, methodology is clearly indicated. More information on the RP Data‐Rismark indices can be found here: http://www.rpdata.net.au/indices/

RP Data: www.rpdata.com.au

Sydney in world's top 10 places to live

2009-04-29T00:39:00.000-07:00

Sydneysiders enjoy Australia's best quality of living - ahead of Melbourne - but better conditions can be found across the Tasman, so a survey claims.

Vienna topped the 2009 Worldwide Quality of Living Survey, but Australia fared well with Sydney placed 10th, Melbourne 18th, Perth 21st, Adelaide 30th and Brisbane 34th.

However, Auckland was fourth in the survey - the only other southern hemisphere city to make the top 10.

The survey, compiled by global consultancy firm Mercer to help calculate remuneration packages for expatriate workers, ranked 215 cities against a range of political, social, economic, environmental, personal safety and public service criteria.

"Both Australia and New Zealand boast some of the most liveable cities in the world," Mercer spokesman Rob Knox said in a statement.

Mr Knox said Australian results were largely unchanged from 2008.

"Economic growth in the Asia Pacific region is outstripping most other parts of the world," he said.

"Multinationals can send their high-performers Down Under to gain experience in a mature market, but on the doorstep of, and with exposure to, one of the fastest moving regions in the world - while at the same time providing the benefits and security of living in Australia or New Zealand."

Wellington, in New Zealand, ranked 12th in the survey, which collected data between September and November 2008.

European cities dominated the top 10: Vienna (1), Zurich (2), Geneva (3), Vancouver (equal 4), Auckland (equal 4), Dusseldorf (6), Munich (7), Frankfurt (8), Bern (9), Sydney (10).

Govt to lift 'hardship' mortgage limit

2009-04-26T20:09:00.000-07:00

08:45 AEST Mon Apr 27 2009
_____________________________________________________

The federal government is set to unveil new measures to ease the plight of those struggling to repay mortgages.

Superannuation and Corporate Law Minister Nick Sherry said under existing arrangements, someone experiencing financial hardship could go to their financial institution and seek relief for debts up to $312,000.

That limit is to be increased to $500,000.

"If the financial institution says no to your hardship, then for the first time we are introducing a low-cost independent dispute tribunal which will be able to hear and determine your argument if the financial institution doesn't agree," he told ABC television.

Senator Sherry said this would apply in situations such as where a person became unemployed and started to fall behind on payments.

He said solutions could include some level of suspension of repayment of interest or the primary debt.

Senator Sherry said financial institutions would be required to agree to tribunal decisions.

He said the overhaul of the financial credit laws would also for the first time include a responsible lending provision.

This would require the institution to ensure the product was suitable and that the borrower had a capacity to repay.

"This is the first time in law in Australia that we will have a responsibility provision introduced," he said.

© AAP 2009

Australia Home Loans - Bloomberg - April 08 2009

2009-04-23T23:02:00.000-07:00

The Australian market is holding up better than other countries. (Asia Confidential)
www.bloomberg.com

Australian Real Estate - Bloomberg - April 14th 2009

2009-04-23T22:53:00.000-07:00

Australian properties were the favorites among foreign investors. (The Bloomberg Edge)
www.bloomberg.com

Reduce land tax says council

2009-04-23T16:56:00.000-07:00

Whyalla City Council chief executive officer Phil Cameron has recommended that the council lobby the State Government to change the law in relation to land tax.

Councillors will discuss his report during their monthly meeting tonight.

Mr Cameron said the arrival of the annual tax bill is always a nasty surprise for investors which could discourage further investment in the property market.

He said increase in land tax due to a rise in property valuations will cause some people severe financial hardships.

"Many people with more than one property are just 'mum and dad' investors buying a holiday home or a rental property as an investment," Mr Cameron said.

"This may cause financial hardship, particularly for self-funded retirees and small investors.

"Commercial and investment property owners are also being hit with higher land tax bills.

"Any rise now comes at the worst possible time for businesses, who are currently battling a consumer slow down and investors who have been stung by the plunge in share prices and superannuation.

"The council is seeking the State Government to lift thresholds from $110,000 to $250,000 and the maximum from $1 million to $2.5 million at a rate of 2.5c per dollar.

"To enable regional South Australia to remain competitive and entice investment during this time of economic uncertainty, Local Government as an industry should support that Property Council of South Australia's pre-budget submission 2009/10 to the South Australian Government in the area of land tax reform."

SEEMA SHARMA

19/04/2009 11:30:00 PM