What Will 2012 Hold For Property?

Written by Paul Kounnas | Wednesday, 08 February 2012

Confused is the word that best describes the real estate market at the moment – at least as far as the media and many gurus are concerned. There are so many different views on where the market is heading that meaningful analysis seems impossibly hard.

Sure, the market is flat and properties have lost some value in recent months. But that just means there are more buying opportunities.

Despite the worst predictions, in the past year Melbourne dwelling values fell just 5.8% according to the latest RP Data figures. ...

Even though prices may remain flat for a while and some properties could fall further, there’s absolutely no reason to expect a crash as the media would have you believe.

There are only four things that could make our property markets crash: Recession, High Unemployment, High Interest Rates, and Oversupply.

Recession, although a possibility is unlikely in the face of our current resources boom. Rather than high unemployment we are seeing a shortage of skilled labour necessitating an increase in immigration. High interest rates are not going to happen any time soon as we have just had a reduction and may yet see another.

Property oversupply also won’t become a factor as we have a national shortage.

HSBC’s Chief Executive Economist, Paul Bloxham, points out the dwelling price to income ratio has remained stable since 2003 at between 3.5 and 4.5. He is forecasting growth in disposable income per household of around 5% per annum over the next few years on the back of strong employment and wages growth – a pointer house prices will grow at this pace.

The fundamentals for a strong medium and long term market are sound as Australia has a strong economy, full employment, rising wages, affordable interest rates and a growing population.

“Historically property prices go up in small booms, catch their breath and sometimes even drop before moving up again.”

“In reality, potential short term problems only underscore the importance of sticking to the basic rules of property investment. Look for property at the right price, in the right location, with the right rental income.”

“This market provides opportunities below intrinsic value as a hedge against further falls.”

Market Update December Quarter 2011

Written by Paul Kounnas | Wednesday, 01 February 2012

Median house prices across Melbourne rose by 1.9% in the December quarter. According to median house data released by the REIV the Melbourne median house price is now $550,000, up $10,000 in the last three months.

The doom and gloom experts who predicted a crash in property values in 2011 got another year wrong. What we experienced instead was a year of controlled price adjustments.

Some experts are predicting that the market may have bottomed out. However the positive data from one quarter is not enough evidence, particularly with median house prices which historically can often swing wildly from quarter to quarter. We ...

have to wait and see what happens with the economy over the next three to six months.

Some believe the property market in 2012 will return small positive gains on the back of the recent interest rate cuts.

The performance of units and apartments during the quarter also had a small increase, mirroring the house market.

The continuing uncertainty about the international economy means our property market will remain subdued. Once the right polices are implemented overseas we’ll see consumer confidence lift and so will property prices.

Market Update September Quarter 2011

Written by Paul Kounnas | Wednesday, 26 October 2011

As anticipated, house prices across Melbourne fell in the September quarter. According to the latest figures by the REIV, the median price for a house is now $551,000, down from the revised June figure of $567,000. This represents an average drop across Melbourne of 2.8%.

While the global economic uncertainty persists, consumer confidence will remain low, so I would expect the housing market to generally continue with its current weakness. Some sections of the market may fall further in value while others may rise yet many will just remain flat.

This latest release of housing data does not represent a collapse of our ...

housing market as the headlines over the last few months would have you believe. The market, in many but not all areas, is simply going through a correction.

According to the latest figures many outer suburbs of Melbourne, particularly those with average prices below the Melbourne median, recorded positive growth. Most of the expensive inner suburbs however recorded negative growth, with the exception of just a few suburbs such a Hawthorn and Balwyn which recorded positive gains.

In our area only Bulleen and Doncaster East had a positive result for the quarter while Donvale and Warrandyte recorded the biggest negative swing in prices.

Market Update June Quarter 2011

Written by Paul Kounnas | Thursday, 04 August 2011

According to the REIV the Melbourne median house price for the June quarter has jumped to $590,000. Despite all the doom and gloom in the media the market has not crashed but increased by 5.4% over the quarter recording an overall price growth of 5.6% over the last 12 months.

Don’t look at median house prices in isolation as they never tell the whole story, just like auctions don’t represent the market. Everyone looks at the poor auction results and thinks that is what’s happening in the market in general.

But auctions only represent a small portion ...

of the market, about 20% Australia wide, so they don’t reflect the whole market. Most vendors sell by private sale and these figures are not readily available like the auction results.

As for the figures for Manningham, don’t read too much into the quarterly changes,they do not reflect the actual market. The annual change in prices for the area is a better indication of how the Manningham market has performed over the last twelve months (ignore the increase shown for Donvale and Warrandyte).