Local, National & International Property News - 02/05/08
National Property News
Time to Buy
Buyers should be rubbing their hands, with rapidly rising numbers of properties available, the 2008 property market will offer choice and value for the astute purchaser.
One measure we look at very carefully is what analysts call 'unsold inventory', which is a count of the properties for sale at a certain point in time. These numbers are a very useful 'dip your toe in the water' indicator. It is also a core variable in APM™ forecasting models as it gives us a direct indicator of the supply factors at play.
Simply, the effect of lots of properties on the market is to dampen competition amongst buyers. As buyers have more properties to choose from, they will find themselves in stronger negotiating positions. When buyers have more choice they become more discerning and patient. In this way vendors suffer a double whammy. Not only are buyers using their better bargaining platform to their advantage but relatively, there will be fewer buyers to go around.
The market is weighed down by the increase of stock available right now. There are 80,629 listings on the market in NSW which is up 29 per cent from the 62,520 listings recorded the same time last year. Buyers are obviously spoilt for choice. You wouldn't exactly say that this is a positive sign for the property market but it will create opportunities for buyers. So, why is the level of unsold inventory so high?
There are two reasons that contribute to the growth of stock on market, fewer buyers and/or more sellers. I say we are experiencing a combination of both.
Agents tell us that buyers are only attending 'open for inspections' in dribs and drabs. This is in stark relief to what was observed last year when attendance sheets were filled with 20 or 30 buyers at a time. Fewer buyers means lower turn over which in turn creates a kind of bottleneck effect. In other words, properties are coming on to the market faster than they are being sold. This creates a build up of properties for sale and puts pressure on prices.
Despite there being fewer buyers, more people are selling. Given that mortgage rates have risen about 130 basis points (1.3%) in 6 months and are not set to get any lower it is hardly surprising that more distressed vendors are selling up.
The conditions are ripe for investors and first home buyers to cherry pick from the oodles of Sydney properties (especially apartments) on the market. At the risk of sounding like an industry spokesperson that always thinks it is a good time to buy; I actually think it is a good time to buy. I believe that those that sit on their hands will look back in 5 years time and lament on how cheap Sydney apartments were in 2008.
Michael McNamara
April 24, 2008 2:13 PM
Domain.com.au Blog
http://blogs.domain.com.au/2008/04/time_to_buy.html
National Property News
Australia keeps getting more expensive!
Weighted average of median house prices in 8 capital cities |
Source: Real Estate Institute of Australia |
Housing stock shortage
One explanation for the paradox of rising house prices despite higher interest rates is that the supply of residential properties still lags demand. Estimates from ANZ Banking Group shows that supply of homes will be only 145,000 in 2007-2008, while demand will surpass 180,000. By 2009-2010 the housing shortage will approach an unprecedented 200,000 dwellings.
Rents are soaring as rental vacancies tumble
Rents for three-bedroom homes have risen by 82% since 1996, and BIS Shrapnel, a forecasting service, predicts they will increase a further 28.5% by the end of the decade. Renting families required 23.9% of their median family income to meet rent payments in December 2007, up from 22.4% in December 2006.
Gross rental yields for Sydney apartments are now around 7% for very small units (50 sq. m.), and average around 5.6%, according to Global Property Guide research (August 2007 figures).
The average cost of central Sydney apartments was US$7,690 per sq. m., with apartments of 150 sq. m. and larger costing around US$9,693 per sq. m., according to Global Property Guide research.
The continued strength in demand for rental properties, coupled with a limited supply of new housing units, has brought the national vacancy rate to a record low of 2%. Vacancy rates were at historic lows in New South Wales (0.8%), Victoria (1%), and Queensland (1-1.5%) in March 2008. In South Australia, rental vacancy remains close to 1%. Vacancy rates were also below historic averages in Western Australia, Tasmania, and the Australian Capital Territory. The rental market in the Northern Territory remains very tight, with vacancy rates in Darwin just over 1%.
Global Property Guide
Apr 24, 2008
http://www.globalpropertyguide.com/Pacific/Australia/Price-History
World Property News
Property market set to slump
It's a question that plays on the minds of millions of people around the world: when is the current rise in house prices finally going to cease? According to new calculations by a theoretical physicist in France, the answer is "soon". Based on an a analysis of historical house prices on the West Coast of the US, Bertrand Roehner of the University of Paris VII has concluded that prices have reached record levels and could soon be heading for a slump. And although the data come from just one region, property prices in many other developed countries may follow the same pattern (physics/0605133).
House prices in the big cities of most developed nations, notably with the exception of Japan, have been rising steadily over the last few years. Although the current price increases have the same magnitude as previous rises (typically an increase of between 80 and 100%), the present price peak seems to be lasting for longer than usual. To understand why and to make predictions for the future, Roehner fitted models to quarterly average house prices on the West Coast of the US over the last 40 years.
Figure 1
Median price of new houses in the West of the United States.
The two numbers above the peaks give the amplitude of the peak (the ratio of peak price to initial price) and the amplitude of the fall in the down-going phase (ratio of trough price to peak price). The notation 1.7+ shows that the current peak is still in its up-going phase and will have an amplitude larger than 1.7. The whole curve has been smoothed using a three-year centred moving average. Source: US. Bureau of Census.
Image and text courtesy: physics/0605133
Roehner identified four rapid surges in house prices during this period, each of which lasted about ten years (figure 1). He then calculated two numbers for each period: the amplitude of a peak (defined by the ratio of highest price to initial price) and the magnitude of the fall in prices (defined by the ratio of the lowest price to the peak price). The results show that the current peak is still in its up-going phase and will have an amplitude larger than 1.7, which is higher than any previous amplitude. This figure is generally less than 3 because house prices are limited by how much people earn.
The model can also predict how house prices might evolve between now and 2011, and shows that the high prices will slowly start to come down at the same rate as they went up (figure 2). This decrease, which will take about six or seven years, is characterized by exponential price falls with rates of about -6% per year, and will start in major cities such as San Francisco and Los Angeles with smaller cities following suit. These predictions might also hold true for other big cities, like London, Madrid, Paris or New York. Indeed, in Melbourne and Sydney the descent has already started.
Figure 2
Projection for the price of new houses in the West of the United States: 2005-2011.
The figure summarizes three of the four episodes shown in figure 1. The two downgoing phases are characterized by exponential price falls with rates of the order of −6.5%. The projection was modelled on the same pattern. Note that the precise moment of the downturn cannot be forecast in the same way because it depends on exogenous factors such as interest rate levels or exchange rates. However, after the downturn one can expect a subsequent 5-year period characterized by a downward trend with a rate averaging about −6% per year.
Source: LEAD Technologies Inc. V1.01
Image and text courtesy: physics/0605133
Roehner says the current period is somewhat different to previous years because there is an inflated demand for property -- mainly from investors and high-income buyers -- that was not so important before. Moreover, investment funds (including pension and hedge funds) and the stock market are more closely associated with real estate than in previous years. Speculation has also boosted house prices to sometimes unreasonable levels.
However, Roehner also stresses the limits of his and other such models: "Consider the London housing market," he says. "A year ago everybody (including myself) was convinced that the turning point had been reached and that prices would decline. In fact, over the last 12 months real estate prices in London have increased by 8%. What happened? As explained in a recent article published in the Economist, Gordon Brown [UK Chancellor of the Exchequer] has offered a governmental guarantee to banks and other lending institutions and devoted about $2 billion in subsidies to encourage buyers. Naturally, no model can take such events into account in advance."
Belle Dumé
May 31, 2006
Physicsworld.com - IOP Publishing
http://physicsworld.com/cws/article/news/25003