RP Data’s newest Property Pulse has pointed to capital city council areas where time on market is skyrocketing as vendors find it increasingly difficult to sell their properties. Analyst Cameron Kusher said vendors now have to readjust expectations with an increase of unsold stock on the market.

“There are record number of properties available for sale in every state and very few are being sold through Auctions with most being offered privately. When there is a private sale situation there is more scope for price negotiation and the buyer will generally save more than in an Auction purchase.

Premium properties are spending the longest time on the market before finding a buyer. Perth’s prestige suburb Mosman Park experienced a 59% increase in time on market for houses, with the average house now taking 123 days to sell. Cottesloe units also have struggled to find buyers, and the average time on market has risen to 160 days.

Now with rates for home loans coming down and property prices coming down as well – it is an excellent time for buyers who can afford it, to make a property purchase.

RP Data’s latest National Equity Report, launched late last year, showed that negative equity has increased from 3.7% at the end of last quarter based on RP Data’s automated valuations.

Property owners who have made their purchases 10  years ago or even earlier are still sitting on very strong profits. It seems that 43% of all properties are still worth more than twice their purchase price.

Far North Queensland, Gold and Sunshine Coasts, have been affected to most by this with some instances of negative equity at 20.2%, 14% and 13.5% respectively.

Meanwhile, Western Australia’s Lower Great Southern and South West and South Eastern Western Australia are also showing high levels of negative equity according to the report.

Australian housing markets have recorded value declines recently with capital city home values down 3.3 per cent from their October 2010 peak to September 2011.

Capital cities have have shown the most resilience against equity falls over the long term, with RP Data saying they have proven less susceptible to ongoing value falls than certain non-capital city markets.

We have already seen 2 rate cuts in late 2011 and further cuts are expected in early 2012. This will undoubtedly boost demand for home loans as well as property.

It generally takes several months for the results of any economic action to reflect in the property market.

State by state, NSW has performed better than any other state, plus 4.2 per cent, though perhaps flattered by home loans approvals being brought forward ahead of the January 1 increase in state stamp duty.

“New South Wales had a very bad start to 2011 but has shown improvement each month since then.

“Oversupply of property in Victoria seems to be hurting the state, minus 0.2 per cent for a third consecutive decline.

“Queensland remains sluggish, up 0.9 per cent, only after two declines while WA held up with a 0.9 per cent gain.”

First-home buyers accounted for 20 per cent of total owner-occupied home loans taken out in November, up from 19.1 per cent for the previous month.

This trend is likely to continue into the new year.

Australian residential building approvals had increased during November by 8.4 per cent to 11,424 units.

This compared with an upwardly revised 10,539 units in October, seasonally adjusted.

Economists expectations of this figure were closer to 6.0 per cent.

Unfortunately, while November was a reasonable month, overall domestic construction is still trending down.

There have been some strong declines in September and October and while future interest rate declines should have a positive impact on this, we have not quite seen it as yet.

The RBA had already reduced the cash rate twice at the end of last year, to 4.25 per cent. This has also had a positive impact in the market in demand for home loans.

In the year to November, building approvals were down 18.9 per cent, the ABS said.

But a number of factors needed to be taken into consideration and a another downward trend in equity markets could throw a recovery off course.

According to the National Housing Supply Council’s State of Supply Report 2011, the overall housing demand-supply gap across Australia in 2010 was 186,800 and increased to 214,700 in 2011.

Currently, New South Wales and Queensland are the worst affected states.

“All levels of government need to work together with industry to address the ever-widening gap,” said REIA president Pamela Bennett.

“The constraints on supply are well known and include land availability, lengthy planning delays, skills shortages, the cost of entering the property market and state government charges.

“We do not need to wait for another report, such as the one to the Council of Australian Governments (COAG). We need to see immediate action by all levels of government.”

Unless adequate supply of housing is provided the current issues with housing affordability will remain.

While today only 2% of home owners are faced with the reality of negative equity, if property prices continue to decline into the 2012 this problem may become more widespread.

The emergence of a sector of the housing market ‘‘under water’’ on their mortgages may hurt an already fragile real estate market. Any forced sales would create a spate of bankruptcies with borrowers owing significant amounts to their lenders, amounts they will not be able to repay.

Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity.

Certainly, Australian households have fared better than most countries in coping with living costs even with housing affordability hovering near historic lows.

However majority of experts believe that this is not the end and that 2012 will bring with it a spate of flat property prices and [possibly further declines.

Ability to borrow as much as 95% for the purpose of a home loan was a significant contributor to this problem.

Macquarie senior economist Brian Redican said negative equity has been a rare feature of the Australian property market until recently.

“High loan to valuation ratio have been quite uncommon until the last 10-15 years,” Mr Redican said, citing the standard LVR measure used to assess homeowners’ exposure to debt. Previously it was pretty much the norm that a purchase would contribute 20% or more towards the property price as a deposit and home loans mostly did not go beyond 80%.

The negative equity estimates here are derived from the share of borrower households with an LVR of 100 per cent or more, compared with this year’s home price falls, in an analysis of Australian Bureau of Statistics and RP Data by the NATSEM.

LVRs have swelled in the past two decades as lending rules were relaxed, permitting banks to extend a higher percentage of the value of the home. Buyers, armed with more funds, then bid up home prices to levels that international observers, such as The Economist, say are among the highest in the world.

Experts are not expecting that negative equity will become as big a problem in Australia as it was some years ago overseas, however it will prevent many people from doing anything as far as buying, selling or renovating.

In a new report, Moody’s says it believes that Australia’s Mortgage Insurance industry may be exposed when Australian property prices start dropping further if funding issues persist in Europe.

The ratings agency warns it remains concerned about the medium-term outlook for the Australian housing sector, as the Eurozone crisis represents a “material” threat and Australia may face the kind of property price crash seen recently in the USA and Europe.

Fitch’s rating agency has reported that the Australian Home Loans that are in arrears are fewer than in past months, indicating that most borrowers do manage to catch up on mortgage arrears.

Moody’s believe that mortgage arrears numbers will go up in Australia over the next decade.

“Since 1990 capital city house prices have increased more than four times while household debt has tripled. Simple metrics indicate that the current price levels are not sustainable.

Mortgage insurers such as Genworth and QBE cover banks for losses on home loans – generally those where borrowers own less than 20 per cent of their properties.

ANZ is less negative on the medium-term outlook but in research published yesterday, the bank’s analysts said they expected house prices to drop further in 2012.

They expect Victoria to have the most significant property price declines.

Latest Real Estate Institute of Victoria figures show Melbourne’s median house price, at $551,000, is already down $50,000 from its peak a year ago.

Moody’s said that despite its concerns, Australian mortgage insurers were well capitalised and the outlook was unlikely to affect the short-term ratings of banks.

The warning comes as official figures show housing starts in Australia tumbled 9.4 per cent in the year to September – the fourth fall in five quarters.

With the exception of Victoria, where the proportion of income required to meet repayment of home loans has gone up by 0.4 per cent to 35.6 per cent, all Australian states and territories recorded drops in this figure. This was led by Western Australia, which enjoyed the largest fall over the quarter, down 2.3 per cent to 23.9 per cent.

According to the REIA, this brings the state’s affordability back to the level it was in December 2003.

The REIA said the Australian Capital Territory remained the most affordable state or territory in which to buy a home, a title which the territory has held for the past five and a half years. The proportion of income to meet loan repayments declined by 0.9 per cent to 17.9 per cent over the quarter; 15.7 percentage points below the national average.

NSW remained the least affordable state or territory in which to buy a home. The proportion of income required to meet loan repayments decreased 1.6 per cent over the quarter to 37.1 per cent; 3.5 per cent higher than the national average.

In South Australia, the proportion of income required to meet loan repayments fell one per cent quarter-on-quarter to 33.5 per cent; in Tasmania it decreased 1.5 per cent to 28 per cent; in Queensland it dropped by 0.5 per cent to 32.5 per cent; while the Northern Territory witnessed a 1.4 per cent drop to 21.4 per cent.

The REIA added that the number of Home Loans taken up by first home buyers increased by 4.4 per cent to 23,997 over the September quarter and 5.4 per cent over the year. During the September quarter, first home buyers made up 15.6 per cent of the market compared to 15.4 per cent in the June quarter.

Most states have see a decline in the value of properties in some cases by as much as 25%, although the average statistics are significantly lower. ]]> http://www.realestatereview.com.au/housing-is-becoming-more-affordable/feed/ 0 http://www.realestatereview.com.au/housing-blocks-are-smaller-and-more-affordable/ http://www.realestatereview.com.au/housing-blocks-are-smaller-and-more-affordable/#comments Wed, 07 Dec 2011 04:23:17 +0000 admin http://www.realestatereview.com.au/?p=1199 According to new research, builders are reacting to falling property prices and more cost-conscious buyers, by reducing the sizes of standard housing blocks as well as sizes of houses constructed for sale.

Stockland, Australia’s biggest listed home builder, has cut the average size of it’s housing lots in it’s  house-and-land packages by almost 20 per cent – to 481sq m – over the past three years.

And Australand Property Group is also redesigning its standard range of homes to make them smaller, thereby reducing the costs of construction.

Peet, which has 70 housing estates, is building on smaller lots, with shared outdoor entertining areas to ensure quality of living is maintained.

Price hikes for land and materials and wage and tax rises are driving up costs of residential construction.

Home prices in the eight capital cities dropped 4 per cent in the year to October, according to RP Data – the biggest fall since the real estate researcher began compiling the figures in 1999.

“There’s a housing affordability crisis in Australia, and one way of keeping the property price point more affordable is reducing their sizes. This makes properties cheaper and easier for purchasers to qualify for home loans.

In pursuing the “great Australian dream” of home ownership – and the increasingly rare quarter-acre block – households have doubled their level of debt as a proportion of disposable income in the past 15 years to 154 per cent, according to Reserve Bank figures.

That eclipses the 133 per cent ratio Americans reached at the peak of the US sub-prime mortgage boom.

Stockland general manager for Victoria, Andrew Whitson, said the group had decided to build smaller homes closer to public spaces rather than homes with big backyards.

The latest HIA – JELD-WEN New Home Sales Report found the number of new homes sold in the month of October 2011 increased by 5.5 per cent, although sales remained down by 8.0 per cent over the quarter to October.

A lift in demand for new home sales, no matter how small is positive news for the Australian Construction industry.

“The recent drop in the cost of fixed rate home loans as well as decline in variable rates, in conjunction with a competitive building market, and a greater availability of skilled trades makes now one of the best times in history to build a new home.

Despite the quarterly increase, we are still in a very week property market.  In October 2011 the volume of detached house sales was 29 per cent below the average of the last fifteen years.  Many first home buyers and investors are choosing to purchase off the plan apartments rather than house and land packages. These allow the purchase the flexibility of having a property close to the CBD which provides a desired lifestyle and is easier to rent.

“There is a compelling case for another, larger interest rate cut next week, while any logic behind achieving a swift return to budget surplus in 2012/13 is spurious given current global economic conditions.” It is not clear whether lenders will choose to pass the full interest rate deduction to holders of home loans, as their own cost of funding is increasing due to debt problems in Europe and the US.

Detached house sales increased by 5.1 per cent in October 2011 following a 3.3 per cent decline in September. Sales of multi-units rose by 9.0 per cent in October following a 5.5 per cent dip in September.