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I THINK it's safe to say that 2009 surprised everyone; 12 months ago there was a lot of doom and gloom with some commentators and punters predicting house price falls of 40 per cent and a national recession.
Well, the recession never came to fruition and now property value growth has surprised even the most bullish analysts.
During the first 11 months of 2009, property values climbed 11.3 per cent across most capital cities, and median prices are now sitting at their highest level. The introduction of the economic stimulus packages by the federal government certainly assisted.
One of the most controversial measures was surely the first-home buyers' grant, which saw an additional $7000 offered to first home buyers (over and above the $7000 grant) for purchasing an existing house and $14,000 for new homes.
The boost was in place between October 2008 and September 2009 at which time it was halved before being removed at the end of 2009. ABS housing finance data shows that between October 2008 and September 2009, 185,546 first home buyer loans were financed. During the previous 12 months, there were just 123,513 first home buyer loans financed.
It wasn't just the first home buyers' grant boost that lured buyers to the market -- the lowest interest rates in almost 50 years certainly helped, with the result that housing was at its most affordable since 2002.
The result of the first home buyers' grant boost, historically low interest rates and the best level of affordability in many years was strong growth in property values and overall economic sentiment improving so much that the Reserve Bank of Australia saw fit to raise interest rates by 25 basis points in three successive months from October to December 2009.
Looking at 2010, market dynamics are likely to be very different thanks to the removal of the first home buyers' grant boost, a higher interest rate environment and the difficulty obtaining finance for new residential development.
As at January 21, the yield curve for Cash Rate Futures indicated the market expectation was that the cash rate will be at 4.9 per cent by the end of the year. Given that the current gap between the cash rate and standard variable loan rates is 2.9 per cent, this would indicate that variable interest rates would sit at 7.8 per cent by year's end.
This reflects a much more neutral setting. However, it would make housing finance more difficult to come by.
We have already seen Westpac announce that new first home buyer customers will need to have a loan-to-value ratio (LVR) of 87 per cent rather than their current requirement of 92 per cent, effectively meaning they will require a deposit of 13 per cent as opposed to the 8 per cent required currently. The impact of rising interest rates will also damage affordability.
Recent data has shown that residential vacancy rates across rental markets have been easing which is no real surprise given that during 2009 to September, 185,546 Australians entered into home ownership compared with 123,513 the previous year, an increase of 50 per cent. In the spin-off, rental rates have eased and subsequently so too have rental returns for investors.
Read more ...
Jenny
Well, the recession never came to fruition and now property value growth has surprised even the most bullish analysts.
During the first 11 months of 2009, property values climbed 11.3 per cent across most capital cities, and median prices are now sitting at their highest level. The introduction of the economic stimulus packages by the federal government certainly assisted.
One of the most controversial measures was surely the first-home buyers' grant, which saw an additional $7000 offered to first home buyers (over and above the $7000 grant) for purchasing an existing house and $14,000 for new homes.
The boost was in place between October 2008 and September 2009 at which time it was halved before being removed at the end of 2009. ABS housing finance data shows that between October 2008 and September 2009, 185,546 first home buyer loans were financed. During the previous 12 months, there were just 123,513 first home buyer loans financed.
It wasn't just the first home buyers' grant boost that lured buyers to the market -- the lowest interest rates in almost 50 years certainly helped, with the result that housing was at its most affordable since 2002.
The result of the first home buyers' grant boost, historically low interest rates and the best level of affordability in many years was strong growth in property values and overall economic sentiment improving so much that the Reserve Bank of Australia saw fit to raise interest rates by 25 basis points in three successive months from October to December 2009.
Looking at 2010, market dynamics are likely to be very different thanks to the removal of the first home buyers' grant boost, a higher interest rate environment and the difficulty obtaining finance for new residential development.
As at January 21, the yield curve for Cash Rate Futures indicated the market expectation was that the cash rate will be at 4.9 per cent by the end of the year. Given that the current gap between the cash rate and standard variable loan rates is 2.9 per cent, this would indicate that variable interest rates would sit at 7.8 per cent by year's end.
This reflects a much more neutral setting. However, it would make housing finance more difficult to come by.
We have already seen Westpac announce that new first home buyer customers will need to have a loan-to-value ratio (LVR) of 87 per cent rather than their current requirement of 92 per cent, effectively meaning they will require a deposit of 13 per cent as opposed to the 8 per cent required currently. The impact of rising interest rates will also damage affordability.
Recent data has shown that residential vacancy rates across rental markets have been easing which is no real surprise given that during 2009 to September, 185,546 Australians entered into home ownership compared with 123,513 the previous year, an increase of 50 per cent. In the spin-off, rental rates have eased and subsequently so too have rental returns for investors.
Read more ...
Jenny