2008 Property Outlook - Midyear Update

National Summary

"With the recent correction in the property market, we would have been expecting prices to drop and for properties to take longer to sell.  When we decided to put together the attached Mid Year Property Outlook, we looked at data from a wide range of sources, but found it impossible to get a consistent view of the Australian property market.  As the data shows, the national property market is complex and affected by a range of local, national and even international factors.  Now more than ever, vendors need to be realistic and buyers need to buy what they can afford.” Ray Ellis, CEO, First National.

Market factors indicate a slow down has occurred, but is unlikely to be sustained.

Following a protracted buoyant housing market it is inevitable that prices come down to reflect a truer and more realistic property value.  This, in turn, stabilizes the market as it corrects itself to a natural balance.

Over the coming 12 months, it is expected that unpredictable external global forces will impact on the market, making it more fragmented across the nation.  Once stabilized, though, the resilient Australian property market will bounce back and recovery will begin as early as 2009.

Key trends at the national level include:
? Median house prices for the June quarter are down on the March quarter for all major capital cities, except Adelaide.  This decrease is expected to continue in the short term as consumer confidence lowers due to high interest rates, rising food and fuel costs and the impact of international economies on the Australian market.
? While median house prices for the June quarter were down on the March quarter, compared to the corresponding preceding 12 month period (as at June 2007) Melbourne, Brisbane, Adelaide and Hobart were all up by between 10.3 per cent and 16 per cent.  Sydney’s property market was, in effect, stalled being slightly up by 1.1 per cent and Perth was down by 1.6 per cent.
? Home owners are delaying putting their houses on the market. This has meant a decrease in the number of house sales, significantly lower auction clearances and an increase in selling times.
? Rental availability is at an all time low, pushing rents higher. The silver lining is that this promises an increasing annual rental yield, creating further opportunities for investors in the real estate market.
? For the first time in 13 years, the Big Four Banks again have power over the market, and are now responsible for 90 per cent of new home loans. With non-bank lenders’ ability to compete reduced, there is less competition and we can expect higher rates.
? Reports from BIS Shrapnel indicate rising rents and improving credit conditions would see housing prices rise significantly by 2011, with the majority of this growth coming in the capital cities.

South Australia

Adelaide was the only major capital city to record an increased median price in the June quarter, with prices up by 0.4 per cent.  In the three months to June, country prices eased, with median house prices dropping by 5.8 per cent, bringing the increase over the past 12 months to 8.9 per cent.  Despite growth over the last 12 months of 16 per cent, Adelaide is still Australia’s most affordable mainland capital city with a median value of $415,701.  Growth is expected to continue at this annual level, with growth of 16 per cent predicted for Adelaide in the three years to 2011. 

ADELAIDE HILLS
“Whilst the Adelaide Hills market has not experienced complete immunity from the volatile market experienced in nearby Adelaide, it has been somewhat insulated. The Adelaide Hills continues to offer value for money due to a combination of new land developments entering the market, the proximity to major amenities and strong business development within the region underpinned by lifestyle appeal.

“The medium residential home price in Mount Barker has increased 20 per cent from $335,000 to $403,000 since the year 2008 commenced.”
Gus Campbell, Sales Consultant/Auctioneer, Pope Nitschke First National (Mount Barker, SA)
Phone: 08 8391 5004 Mobile: 0418 848 957

BAROSSA VALLEY
“The market has slowed here in the past few months. Buyers are still out there but they are not rushing in. I would say we are in a buyers’ market in the Barossa valley but we expect a pickup in sales once we get through the traditional slower winter months. There are still a number of positives, employment is strong and we are coming off the back of a very good vintage in 2008 compared to 2007. The season has broken, with good rainfalls, and this will be very positive for the rural sector – particularly cropping and grazing.

“I still believe that the market here is well placed as prices are still attractive when compared to the other states. We have noticed an increase in enquiries from workers in the mining industry seeking investment properties and wanting to enjoy the Barossa lifestyle which enables them to fly in and out of the various mine sites. The Barossa is just over one hour to Adelaide airport and, with the advent of the Northern Expressway by 2010, the time will reduce to around 40 minutes.

“Yes the market has slowed, however we are well placed to take advantage of the rally in spring whilst the mining boom in SA is only just beginning to kick in.”
Vaughn Pairman, Barossa First National, Nuriootpa. Mobile: 0414 709918

ADELAIDE METROPOLITAN
"The Adelaide metropolitan market has seen a reduction in buyer enquiry in the last quarter. Homes are taking a little longer to sell with the number of days on market increasing to approximately 30 days on average. Negotiations have become somewhat more difficult as buyers are increasingly cautious about the price they're willing to pay.

“Investor interest from WA has decreased a little but first home buyers remain active in the marketplace. Properties valued in excess of $1 million are enjoying stable demand, however market fragmentation is evidenced by prices in outlying suburbs having fallen while prices in other suburbs remain stable."
Peter Wundersitz, Peter Wundersitz First National, Mile End, Phone:  08 8404 3111

Disclaimer: while we believe the data included in this report is accurate, markets change and move quickly.  First National takes no responsibility for actions taken on the basis of this report and we encourage all vendors and buyers to conduct their own research.

REFERENCES:

Australian Property Monitors, April 2008
BIS Shrapnel Residential Property Prospects 2008 to 2011
RP Data/Rismark International end of month Property Value Indices Report

Issued by: First National Real Estate