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.

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.

Auction figures released by Australian Property Monitors found clearance rates in Brisbane were down by 35.5 per cent over the weekend, with Brisbane  recording the lowest clearance rate of only 12.5 per cent.

The story was much the same in Melbourne, with auction clearance rates declining by yet another 10.3 per cent to 47.4 per cent.

The Real Estate Intitute of Victoria (REIV) reported a 53 per cent clearance rate in Melbourne on the weekend.

Enzo Raimondo, REIV’s CEO, said the auction market “has been typified by consistently moderate levels of demand this year and this weekend [was] no different.”

Almost half of all auctions held were passed in with majority of these being passed in on a vendor bid.

“Next weekend the REIV expects around 1045 auctions next weekend.”

Despite the sharp falls in both Brisbane and Melbourne, clearance rates in Sydney and Adelaide remained relatively stable with 52.4 per cent and 34.5 per cent of properties selling, respectively, over the weekend.

A three bedroom house located in Annandale, in Sydney’s inner west, took the title as most expensive property sold over the weekend, selling for in excess of $2.4 million. The most affordable home was three bedroom villa in St Marys, in Sydney’s outer west, which sold for $241,000.

The Real Estate Institute of NSW (REINSW) reported a Sydney clearance rate of 58 per cent for the weekend, with 372 properties selling and 268 passing in (33 of those on a vendor bid).

Across the board buyers appear to be holding back hoping to see further property price drops. It does not appear that the recent interest rate cut by the RBA has made any difference to buyer demand. Despite home loans being significantly cheaper now than even 3 months ago, demand for property is just not there.

RP Data’s Property Pulse has reported that housing stock is piling up, with 7.4 months of effective supply on the market.

Research analyst Cameron Kusher said that while the number of property sales remain around the same level as last year, there are a larger number of properties on the market and this larger number is not matched by the number of property buyers.

“A spike in recent property listings data acquired by RP Data suggests that available stock is at near-to record levels and is being driven by unsold properties re-listed while new properties continue to enter the market. This result is indicative of slower market conditions and longer than normal selling periods,” Kusher said.

Kusher suggested that housing stock levels may have reached peak levels in some capital cities, though housing stock continued to grow in Melbourne and Adelaide. He said that, while he expects the recent RBA rate cut to see increase in demand fro quality properties and potential better sales volumes.

“My reasoning behind this is because while demand for home loans is fairly flat, consumers show low levels of optimism when it comes to property purchases and retail trade continues to be slow, at a macro level the property market is likely to be subdued until we see a significant reduction in the number of homes for sale,” Kusher said.

Once rates start moving down more and demand for home loans improves, so should property sales.

According to the latest data from Australian Property Monitors, 54.3 per cent of properties cleared in Sydney over the weekend.

The most expensive property to achieve a sale was a $3.5 million, four bedroom house in Saratoga, the most affordable property sold in the capital city was a two bedroom townhouse in Macquarie fields.

In Melbourne, only 48.1 per cent of properties cleared at auction – a sizable drop from 69.4 per cent last weekend.

The Real Estate Institute of Victoria chief executive Enzo Raimondo said both home buyers and property professionals are now hoping the Reserve Bank cuts the cash rate at its November Board meeting. Home owners and renters alike have been squeezed from all directions over the past 12 months and are seeking some relief.

“It has been twelve months since the Reserve Bank last increased interest rates.  This Tuesday, buyers, sellers and those holding home loans will be hoping to see a cut to rates and if it occurs it will help encourage more buyers into the market, particularly into the new year.

According to the latest data from Australian Property Monitors, only 56.3 per cent of properties listed for auction in Sydney last weekend actually sold.

The most expensive property sold in the capital city at the weekend was a $3 million five bedroom house in Strathfield, while the most affordable property to go under the hammer was a $290,000, two bedroom unit in Fairfield.

In Melbourne, the auction clearance rate was a little better, with 60.5 per cent of the 825 properties clearing. This is not at all the kind of clearance rate on generally expects in October. Whats more the anticipation of a possible interest rate cut on cup day, together with very cheap fixed rate home loans offers available in the market today does not seem to have done anything to improve the situation.

But despite the solid result, the Real Estate Institute of Victoria’s chief executive Enzo Raimondo said the auction result was still a long way off what was achieved this time last year.

“The clearance rate this weekend last year was 67 per cent. It’s important to note that the number of auctions was also higher last year with 1,127 homes offered for sale,” he said.

“Next weekend 445 auctions are expected, a lower number than this weekend due to the Melbourne Cup being raced on the following Tuesday.”

New research by RP data states that most Australian capital cities have actually enjoyed a slight increase in property values during 2011. Sydney, Canberra and Darwin have all managed to show some price appreciation  in home values located in these cities.

According to new research by RP Data, Canberra was the standout performer last month, recording 1.9 per cent growth in property values.

Darwin wasn’t far behind with 0.6 per cent growth and Sydney managed to improve marginally with 0.1 per cent growth.

Melbourne property values declined a little – a drop of 1.4 per cent during July 2011.

But, RP Data’s research director Tim Lawless said the fall in Melbourne house prices shouldn’t alarm potential investors.

“After rising by a stunning 29 per cent over 2009 and 2010, Melbourne values had now corrected by 5.3 per cent in 2011,” he said.

This situation may well worry foreign investors who have poured more than $20 billion into the market every year since 2004, on average, according to data from Australia’s Foreign Investment Review Board.

While many overseas investors are still optimistic one can well ask the question of how long this will last?

“That said, at this point, it has to feel like a long-term investment.”

The combined average price of homes and apartments in Australia’s capital cities is off 2 per cent from a year ago and 2.7 per cent this year, checking in at $462,500, according to property research firm RP Data-Rismark. This comes as Australia’s economy starts to cool, with the central bank recently downgrading its average growth forecast for the year to 2 per cent from 3.25 per cent.

Home Loans in arrears by 30 days or more reached an all-time high in the first quarter of 1.8 per cent, according to ratings firm Fitch Ratings. However, that level is still well under  the home loan arrears experienced by the US, which saw 8.4 per cent in the June quarter, according to the US Mortgage Bankers Association.

According to the Australian Bureau of Statistics, new-home construction in Australia has jumped 26 per cent in just the last year, as of June, to about 165,549 units, and is up 10 per cent from 2006. A large part of this increase comes from Victoria, where home construction is up 40 per cent since 2006 at 54,476 units last year in the state capital, Melbourne, Australia’s second-largest city.

About 10 per cent of the 120,000 new homes approved for construction by city governments in Australia in the past year were apartments in Melbourne, according to city administrators and the bureau of statistics.

Home and apartment prices in Melbourne are down 3.9 per cent this year to $485,000. In the Western Australian capital of Perth, prices are down 2.4 per cent to $461,000, according to RP Data-Rismark. Sydney has side-stepped some of the weakness, up 0.5 per cent over the past 12 months, but still off 1.3 per cent since the start of this year to $515,000.

So far, Australia’s big four banks – ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank – appear to be weathering the turn, though scrutiny could increase if the market worsens. The four hold more than $850 billion, or more than 80 per cent, of Australia’s home loans, though Fitch estimated last year that they could withstand a price drop of up to 40 per cent.

“The big question is where does unemployment go, that’s when you get the forced selling,” said Ivan Colhoun, head of Australian economics and property research at ANZ, who finds solace in Australia’s still-low 5.1 per cent unemployment rate.

Locally, buyers have already started to wane. In the last year, there were 90,210 first-home buyers across Australia, 35 per cent lower than the previous year and a seven-year low, according to BankWest, a Western Australia-based lender and unit of Commonwealth Bank.

Mr Donnelly, whose firm has sold residential property in Australia worth more than $1.2bn to mostly overseas investors, says the market in Sydney and Brisbane could sidestep some of the weakness, largely because both fell behind in the recent development push.

Brisbane has also been weak, with prices off more than 6 per cent this year, but much of the drop stems from the devastation to the capital of Queensland state earlier in the year from a series of floods.