HOUSE price growth is set to slow nationally this year as low inflation, weak wages growth and oversupply worries in some cities put the brakes on recent rises.
And the popular claim that home prices double every 10 years has become a myth, as a News Corp Australia analysis shows that only Sydney delivered on that promise in the past decade and forecasters say no city will grow this much in the coming 10 years.
From 10 per cent-plus growth in 2016, most independent forecasters expect home prices to rise about 5 per cent nationally as the likelihood of another Reserve Bank interest rate cut diminishes and hot markets in Sydney and Melbourne start to cool.
“We are expecting slower growth, in the region of three to five per cent,” said CommSec chief economist Craig James.
“However, we had underestimated the demand that was out there in 2016. The Sydney market still remains quite buoyant,” he said.
Each city has its own property price cycle and different supply and demand issues. Sydney and Melbourne have boomed, Perth and Darwin dropped as the mining boom petered out, while other cities have been relatively flat.
“It’s basically been Sydney and Melbourne then daylight comes next,” Mr James said.
An analysis of Real Estate Institute of Australia data shows that Sydney’s house prices have surged exactly 100 per cent in the past decade, while its unit prices rose 95 per cent.
No other capital city saw prices double in the decade — Melbourne houses were next best (up 94 per cent), Darwin 57 per cent, Adelaide 51 per cent, Canberra 51 per cent, Brisbane 45 per cent, and Perth and Hobart 23 per cent.
Mr James said increasing supply — particularly in apartments in Sydney, Brisbane and Melbourne- should slow down price growth. “Across the country a lot of new buildings have been approved and are under construction. When wages are growing at 2.5 per cent it’s hard to sustain growth in home prices at these levels.”
Metropole Property Strategists CEO Michael Yardney said property markets would be fragmented in 2017 depending on local economic strength and supply and demand, with two-thirds of full time jobs likely to be created in Melbourne and Sydney to underpin continued outperformance there.
“The elephant in the room is the huge oversupply of new apartments being completed in Brisbane and Melbourne,” he said.
Most areas of Australia were unlikely to double in price over the next 10 years, Mr Yardney said.
“We’re now at a time of lower inflation, lower interest rates, lower economic growth and lower wages growth, so it’s likely we’ll have lower capital growth of property in the next decade,” he said.
However, some suburbs would outperform. “In the last five-year Census period, while overall wages growth in Australia was 20 per cent, some municipalities had 40 per cent wages growth. In general these were the gentrifying inner and middle ring suburbs where affluent owner occupiers with higher disposable income wanted to live and could afford to pay for the privilege of living there.”
Originally Published: http://www.goldcoastbulletin.com.au/
Would Australian Households Be Better Off if We Ditch Negative Gearing?
Economic modelling undertaken by University of Melbourne economists, and presented to the Reserve Bank last month, shows that three-quarters of Australian Households would be better off if negative gearing is abolished.
The study was posted on the Reserve Bank website for public release on Friday.
The paper explores the implications of negative gearing – including a 30 per cent collapse in the supply of rental properties – and found that abolishing negative gearing would lead to an overall welfare gain of 1.5 per cent of GDP.
Negative gearing is a policy that largely benefits landlords, and for the 17 per cent of the Australia population that have property investments – out of which 70 per cent are negatively geared – would be worse off.
The study estimated that thirteen per cent of the population would be directly influenced by the removal of negative gearing, and likely to quit their holdings.
“The housing prices fall because removing negative gearing takes a significant amount of housing investment out of the property market,” the report said.
“Both the proportion of landlords and the amount of resources allocated to housing investment, given by the average expenditure, have fallen significantly after the policy reform.
Importantly, removing negative gearing increases the average homeownership rate of the economy from 66.7 per cent to 72.2 per cent.
The improvement in homeownership was observed most predominantly among poor households, where the fall in house price and the rise in rent reduce the price-to-rent ratio in the economy by 4.2 per cent.
“This has direct implications on housing affordability as the fall in house price lowers both the downpayment requirement for mortgages and the size of mortgages required to purchase a house, making it easier for households to own a home.”
If negative gearing was to be scrapped, the average mortgage size held by homeowners would likely decrease 21 per cent.
“Eliminating negative gearing takes young landlords who were rich enough to meet a downpayment requirement for investment properties away from the market.
“This reconciles a recent trend in the property market that there has been a rise in investment housing debt holdings by young and rich 35 households who would have benefitted the most from negative gearing concessions.
“The aggregate welfare for the economy improves upon the repeal of negative gearing … around 80 per cent of households are better off after the policy reform.”
Australia’s negative gearing regime stands alone against comparable OECD countries. Only New Zealand and Japan allow the unrestricted use of negative gearing losses to offset income from other sources.
The report’s authors, Yunho Cho, Shuyun May Li, and Lawrence Uren said that along with their findings on negative gearing it would also be worth considering some partial restrictions, such as allowing tax deductions for mortgage interest payments only.
Originally Published: www.brisbaneinvestor.com.au
QLD set for double-digit property growth
SOUTHEAST Queensland house prices are tipped to grow by up to 20 per cent in the next few years as Sydney and Melbourne’s once sizzling property markets continue to lose steam, according to veteran real estate agent John McGrath.
Speaking after the release of the group’s annual residential market report, Mr McGrath told The Courier-Mail the state was only just over halfway through the current property cycle and stood to benefit from the slowdown starting to grip the southern capitals.
“We’re very bullish in your part of the world,” Mr McGrath said.
“There’s no doubt in my mind there will continue to be growth in southeast Queensland.”
Property research firm CoreLogic, which releases its monthly home value index this week, has flagged a further fall in Sydney housing values, but a rise of 0.3 per cent in Brisbane home prices.
Mr McGrath said he expected between 10 and 20 per cent growth over the next two to three years in the Queensland’s southeast corner, led by Brisbane.
“There have been huge capital gains in Sydney and Melbourne and not only has it made it unaffordable … it’s certainly made people look for better value elsewhere in the country,” he said.
“I think southeast Queensland and Perth represent that value.”
The McGrath report found southeast Queensland’s affordability was attracting record levels of interstate migration as well as rising interest from investors and first home buyers, with its housing market continuing to produce solid results despite the economy remaining sluggish as it transitions away from mining.
“During the GFC, a lot of people thought it was sensible to wait, but now we’ve got a lot of people sitting in ordinary homes in Sydney and Melbourne worth $2 million to $2.5 million – many in their 60s and 70s – who are saying ‘what could we do next?’ and looking to southeast Queensland,” Mr McGrath said.
And he said it wasn’t just Baby Boomers and seachangers who were selling up and buying in Queensland with money to spare, but also young families.
Mr McGrath predicts suburbs with easy access to the CBD, the water and/or infrastructure to be the big winners over the next year.
In Brisbane, his top pick is the bayside suburb of Wynnum, 14km from the CBD.
It borders the more prestigious Manly and boasts the same seaside village atmosphere without the hefty price tag, which is attracting younger professionals as well as interstate and international buyers.
North Lakes in the Moreton Bay region is also expected to continue to experience strong growth, with significant residential and commercial developments in the pipeline.
“I think it’s going to continue to attract a lot of young families that can’t afford inner Brisbane,” Mr McGrath said.
On the Gold Coast, Coomera is tipped to benefit from new infrastructure including the $470 million Westfield Shopping Centre due to open in late 2018.
“There are a lot of great areas in between Brisbane and the Gold Coast and Coomera is a great example,” Mr McGrath said.
“I think it will continue to grow.”
On the Sunshine Coast, McGrath’s top picks are Peregian Springs and Caloundra.
The regional centre of Toowoomba is also tipped for strong growth over the next year thanks to its affordability and access to east coast cities via the new airport, according to the report.
Originally Published: brisbaneinvestor.com.au
This is why Queensland is first-home buyer’s dream
Queensland first-home buyer loan approvals have soared by nearly 20 percent in the last 12 months, jumping 5 percent in the last month alone, new data shows.
The Sunshine State boasts the highest number of first-home buyers in Australia, thanks to low-interest rates, a $20,000 state government grant and one of the country’s most affordable housing markets.
The latest data from Australian Bureau of Statistics shows Queensland first-home buyer activity has increased by 16 percent during 2017 – and it’s likely to intensify, with developers ramping up the incentives for first-time buyers as the last few months of the $20,000 First Home Owners’ Grant close in.
The grant, which was scheduled to drop back to $15,000 on June 30, was extended until December 31 by the Queensland government.
Domain Group senior economist Andrew Wilson said the grant had been extremely successful in bringing forward demand stimulating the first-home buyer market.
“We had a rush of first-home buyers in June when people thought the grant was going to end but since then the numbers have continued to keep growing,” he said.
While Sydney continues to battle a housing affordability crisis, Queensland first-home buyers have 92 suburbs in Greater Brisbane alone with a median below the average purchasing power ($392,000) to choose from.
In the Brisbane LGA, 17 suburbs still have medians of $500,000 or less, the latest Domain Group data shows, whereas Sydney now has no suburbs with a median of $500,000 or less.
Acacia Ridge, Boondall, Tingalpa, Deagon and Riverhills all have a median house price of $500,000 or less.
With the $20,000 grant scheduled to drop back to $15,000 at the end of the year, developers are now making a renewed push to get first-time buyers to take advantage of the extra cash before it expires.
One of Australia’s biggest residential land developers, Peet Limited, is leading the push, recently releasing 40 new house and land packages under $400,000, with some packages starting as low as $295,000 with the First Home Owners’ Grant.
The packages are available in communities near Ipswich, Caboolture and Logan – some of south-east Queensland’s biggest growth corridors – and include front landscaping and fencing.
Peet Limited CEO and managing director Brendan Gore said the company wanted to show homebuyers that there was still a big choice in quality, affordable homes available.
“People are hearing a lot about escalating property prices and are really worried about being priced out of the market.
“We want to reassure them that it isn’t too late. It is still very possible to buy an attractive family home, close to amenities, in an area with good investment potential, for under the magic $400,000.”
Mr Gore said although the grant had been extended a number of times, home sales tended to peak whenever buyers could see the grant coming to a close.
“The First Home Owners’ Grant is a big help for people who are struggling to get into the property,” he said. “The deadline is definitely on the radar for those buyers who are eligible.”
Peet’s 40 under $400,000 packages will be available until November 3, 2017, or until sold out.
Originally Published: brisbaneinvestor.com.au
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