Property Market Update April 2009

Australian Property Market Update April 2009

Property is selling as first home buyers and investors enter the market thanks to falling interest rates, the First Home Buyers bonus and rising rents.  Investment property fundaments are looking positive.  Excerpts taken from our Priority Investors Update in April 2009.  Subsrcribe now to receive the latest market updates

Dear Investor

We have been flat out during the last few weeks and there is plenty of activity in the market.  Many investors are positive about the market and are investing now, whilst at the same time we are fielding emails from other investors who are fearing that the market will go backwards, is it the right time to invest, should we wait for prices to fall etc.  I thought it may be a good time to let you know how we are finding the current market.

Please find below:

A brief property market update
A summary of our current projects


Property Market Update:

Following are some facts and figures from the experts.  But, I know our investors are always keen to know exactly what other investors are doing, what is really happening right now in the market. Who’s buying etc.

Well, let me start with this:
Looking at the 9 projects that we currently have listed.  8 in Melbourne & 1 in Sydney.  I had a look at the 2 week period from March 17th to March 31st.  On most of these projects, in addition to ourselves, local agents and or the developers are marketing them.  So they are being sold to both intending investors and owner occupiers.

Over the above period, when I looked through what had sold within each project, added it all up, then deducted those that came back on the market (occasionally an intending buyer has a change of mind) the net result was that over the above 2 week period, 69 properties were listed as sold.  That’s just looking at a 2 week period, in the 9 projects that we are involved in and it does not coincide with any of these projects being released to the market.  That is, there were not huge sales volumes in one particular project when it was first released, but rather these 2 weeks are typical of what we have been seeing over the last 6 to 8 weeks.

So for those who are waiting for prices to drop and better deals to become available, don’t hold your breath.  Property is selling now, at the asking price and these sort of sales figures will soon put us in the environment where developers attain their required pre-sales to lock in their finance and then start to raise prices.  In fact one developer has already suggested to us that they intend raising prices on their remaining stock, within the next 4 to 6 weeks.  This is great news for those investors who have locked in their purchase, but not so good if you are thinking that the market will crash and prices will fall off.

But, enough of our experience, what are some of the experts saying. 

From Paul Braddick, Chief Economist ANZ 17th March 2009:
“Australia has one of the – if not the – strongest population growth rates in the developed world and even if skilled migration targets were cut to zero in the years ahead in response to fears of rising unemployment, underlying housing demand would still be 150,000 in 2010 …..we currently estimate that by mid 2010 Australia will have an unprecedented underlying housing shortage of 250,000 dwelling”

From the National Housing Supply Council Report March 2009:
This is a very interesting one as it not only shows a future housing under supply but also looks at the required housing types in to the future.

The type of housing required for the next 20 years will be very different from the housing that was required over the last 20 years. 

For the next 20 years, the report suggests that that the following increase in housing types is required:
For Group households an increase of 28.9%
For Single person households an increase of 63.7%
For Couples without children an increase of 36.7%
For Single parent families an increase of 23.7%
For Two parent families an increase of 20%

Wow, check out the figures for the increases required for single person and couples with no kids housing.  You can see why one & two bedroom apartments are and will be in such high demand!

Looking at some actual household number requirements from the report, it suggests that:
On a moderate growth moderate supply outlook Australia will be short by 108,000 dwellings by June.  That will grow by 316,000 by 2018 and 431,000 by 2028.

And, as per the figures above, the major growth housing types are not the family homes of the past but property for singles & couples with no children.

Looking at the extra households required by region, for a medium growth scenario. 

Melbourne tops the list at 581,000
Sydney is second on 472,000
Then Brisbane at 346,000

Hopefully you can see why we have such a focus on Melbourne and are expecting throughout this year to also increase our property offerings in Sydney.

Given the expected housing undersupply Jason Anderson of BIS Shrapnel has suggested in their Outlook for 2009 that they expect that the housing shortages will push rents up a further 25% over the next 3 years.

There is really no end in site as regards Australia being able to address the imbalance in supply and demand over the short or even medium term.  In fact Bis Shrapnel have forecast a 23% drop in National building start values in 2008 – 2009, so the problem is not easing, it’s increasing.

When I was in Melbourne a few weeks back I attended a presentation by Charter Keck Cramer, one of Melbourne’s leading valuers & property research houses.  Their suggestion was that the undersupply would continue to at least the next 10 years!

As developers struggle to get finance approvals, but demand continues to increase it is difficult to see anything other than a rise in rents and a rise in property values over the medium term.

As I have mentioned previously, if we look at how property has performed in the past:

When we experienced the crash in Oct 1987:
The Dow Jones fell approximately 23%
Australian All Ordinaries fell approximately 42%

In the 20 months immediately following the crash:
Melbourne apartments rose 38% and houses 41%
Sydney apartments rose 54% and houses 46%

Looking at our current situation:

Many investors have already liquidated a portion (or all) of their stocks.  So there is currently millions & millions in cash, with investors looking to diversify their portfolios.

Historically investors do not stay in cash for too long, so they will be looking for a new home for this cash, and for many who are wanting to move away from the volatility of the stock market.  Their new home will be in the safety of bricks and mortar.

We are certainly not suggesting that you should expect massive returns over the next few years (as we saw following the crash of 87).  But we would expect that property will keep on doing what it has always done.  Over the last 10 years, houses have had average growth of 13.4% per annum & apartments 12.8% per annum.

Following is a summary of some of our most recent projects that are available now:

Given the above figures & especially taking in to account the increase in housing required over the next 20 years for singles (63.7%) & couples with no kids (36.7%).

We have a range of excellent inner city, off plan Melbourne projects, with a range of 1 & 2 bedroom apartments, which will ideally suit singles & couples with no kids.  Plus our Sydney project. 

Following is a very short summary of some of our current projects

Apartments & Townhouses St Kilda East – Melbourne:
We released this project just last month, it is selling very well, but still some great options available.  Some smaller one beders from $375,000, some very nice 2 beders from $499,000 and some larger 2 bedroom townhouses from $650,000.  Due to complete in late 2010, nice boutique project of just 34 apartments & townhouses:  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.

Apartments Windsor – Melbourne:

We only just launched this one to the market last month.  The developer is just about to complete their display suite and sales have been picking up each week as the local market becomes aware of the project.  It’s well located just 5kms from the CBD and just 350m from Melbourne’s famous Chapel St with all of its shops, restaurants, cafes etc.  Completion is not expected until late 2010.  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.

Apartments & Townhouses Brunswick – Melbourne:
This is the other project that we only just released last month, so it too is fairly new to the market and the developer is yet to launch it publicly.  Positioned just 5kms north of the CBD in the eclectic suburb of Brunswick.  The development has a 5 star energy rating and is close to transport, shops, restaurants, universities, hospitals etc.  Just 2 x one beder remaining from $350,000 plus a range of 1 plus study, 2 bedroom 2 bathroom & 3 bedroom townhouses available.  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.

Apartments in South Yarra – Melbourne:
This is a high quality, very well located project. Whilst our investors have had access to this project for a while now, it is just now receiving significant local exposure in the Melbourne media, with plenty of first home buyers purchasing.  Just 4kms from the CBD and in the heart of South Yarra, this project is in a very exciting location that is undergoing significant revitalisation.  The site is very close to what will be Australia’s very first 6 star hotel.  So this is a quality location.  One beders are priced from $364,000 & 2 bed 2 bathroom apartments from $615,000.  Completion is not expected until mid 2011.  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.

Terrace Homes Malvern – Melbourne:
This is a very exclusive project in a fantastic location.  Malvern is one of Melbourne’s most highly regarded suburbs and this project is part of the redevelopment of the historic Stonington Mansion site.  This project can never be repeated, is very upmarket & just 7kms from the CBD.  A limited range of 2, 2 + study & 3 bedroom terrace homes are available, from $855,000.  Completion is expected in May 2010.  Completion is not expected until mid 2011.  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.

Apartments Pymble – Sydney:
Ideally located in Sydney’s north shore, just 500m from the Pymble train station.  This is a high quality, smaller apartment block of just 34.  Predominately large 2 & 3 bedroom apartments, with just a few large one beders.  Priced from $440,000 this quality project has a strong environmentally sustainable design focus.  It is due to complete in August this year.  Completion is not expected until mid 2011.  We have negotiated the usual benefits for our investors.  Please see our Investors website for full project details.


Please let me know if you have any queries or would like further information on any of our current projects. 

Regards

John Faulkner

The above update is part of our April 2009 Priority Investors Update.  If you would like to receive regular market updates and news on our latest release off plan properties, please complete your Priority Investor details.

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