The property market has seen some shifts in recent months, with many relieved to see some stabilisation in house price growth to more sustainable levels. While the heated market of late 2009 and early 2010 saw prices skyrocket, and while growth rates continue to edge upwards in many areas, more moderate growth brings more buyers and investors to the fore and creates a healthier, more sustainable balance between supply and demand. As with any market, the property market moves in cycles. Understanding its movement and likely trends over time is the key to making the most of opportunities at any point in that cycle.

While house price growth in capital cities moderated to 0.2% in April according to RP Data, property values increased by 11.9% over the last 12 months, thereby still giving vendors excellent opportunities to make good capital gains. Price growth has been the most significant at the upper end, with the premium residential market recording the highest capital gains over the year and expected to continue to outperform.

While the above reflects averages across the nation, it is always advisable to consult your local real estate specialist for information about your specific area. There can be great variance in market conditions between different regions. For example, some Stockdale & Leggo agents have observed some caution due to a climate of rising interest rates, which incidentally remain below the 10-year average, while others have seen no impact whatsoever in a market that remains buoyant in their area.

It is important too to recognise that rate increases are a direct response to a continually strengthening Australian economy, with Gross Domestic Product expected to grow by 3.2% in 2010 and 3.6% in 2011. Unemployment is expected to fall to 4.8% by the end of next year. According to the Organisation for Economic Development (OECD), the Australian Government finances are amongst the strongest in the world. Now, that s good news!  

Those looking to purchase their first home, in addition to taking advantage of the FHOG and state-based incentives, can escalate their savings with the Federal Government s First Home Saver Account (FHSA). Despite being introduced in October 2008, surprisingly few people have taken advantage of the opportunity to earn government co-contributions on savings and tax-breaks on interest earnings, perhaps due to the scheme s relatively low profile. It does, however, offer some excellent incentives.

Here are the main facts:
- Government Co-Contributions consist of 17% on the first $5,000 (indexed) of individual contributions made each year. In effect, an individual contribution of $5,000 will attract a Government contribution of $850 per annum. There is a limit of $75,000 (indexed) on the overall account balance. No minimum annual deposit is required to keep the account open.
- Funds must be used to buy or build a first home in which to live for at least 6 months within the first 12 months of purchase or completion of construction.
- Total funds can be withdrawn and the account closed only after an individual has made minimum contributions of $1,000 over the course of at least four separate financial years.
- If circumstances change and the individual no longer wishes to purchase a home, the account can be closed, but the total balance must be transferred into superannuation.
- Tax incentives are as follows: contributions are not subject to tax; investment earnings (or interest) are taxed at a reduced rate of 15%; withdrawal of funds is tax free; and FHSA balances are exempt from the income and assets test.
- Account providers include public-offer superannuation providers, life insurers, friendly societies, banks, building societies and credit unions.

For more information on how to fast track savings for your first home, see www.homesaver.treasury.gov.au.

House values in Australian capital cities continue to rise, with a 1.4% increase in February bringing growth to 12.7% after values fell approximately 3% in 2008. Market activity, and subsequently auction clearance rates, remain consistently high. These strong market conditions are partly due to an ongoing shortage of housing driven by unprecedented population growth of 2.1% per annum, which is amongst the highest level in the developed world. However, the better-than-expected figures are also a result of rising business and consumer confidence brought about by a strengthening economy and robust employment growth.

In fact, RP Data reports business confidence at a 15-year high at the end of 2009, while consumer confidence also remains at historically high levels, suggesting the economy will strengthen further over the coming quarter. Reserve Bank Governor, Philip Lowe, suggests the economy is now in reasonably solid upswing . High confidence levels, given more consumers are likely to make high-commitment decisions like purchasing property, generally translate into even higher levels of activity on the property market.

While mortgage holders might be tightening belts as rates rise, it s also important to keep in mind that last year s emergency cash rate was just that. Rates returning to a more ‘normal level are indicative of a strengthening economy, which is good news all round for both the property market and Australians in general. The cash rate still remains below the ten-year average.

Most analysts, given the current climate of rising rates, suggest house prices might well soften in the latter part of the year. Those considering selling their property might do well to ‘strike while the iron s hot – and snap up opportunities for excellent capital gains, especially while ever-increasing numbers of hungry buyers compete for too few properties.

The early part of the 2010 property market has been stronger than expected, with levels of activity significantly higher than at any time during 2009. House prices have gained excellent ground, with national median house
prices up by 4.8% in the December 2009 quarter and by 12.1% over the year. This is, according to Australian Property Monitors, the highest rate of annual growth experienced since 2003. All state housing markets except Perth are at all-time highs. The Melbourne market, with an 18.5% increase in 2009, is the strongest. Sydney enjoyed a 12.1% increase, Brisbane 7.7% and Hobart 14.4%. Unit median house prices grew in value in all states across the nation.

A sharp increase in activity at the upper end of the market, fuelled by a resilient jobs market, rising share market and increased levels of confidence, has largely driven the exceptional levels of growth. Property values in the most expensive 50% of suburbs grew by more than 17% since March 2009, compared to a rise of 9.6% in the lower-priced half.

The gap left by first home buyers since the First Home Buyer Boost expired is being eagerly filled by second, third and fourth-time buyers, along with a steadily rising number of investors purchasing properties at the higher end.

Investors are indeed proving to be a strong force in the market, a trend expected to continue into 2010, which is not surprising given the favourable conditions: strengthening house prices for long-term capital gain; interest rates remaining well below average; a severe housing shortage and high demand fuelled by record levels of population growth, a baby boom, and more renters being priced out of the buyers market; and strengthening rental yields. Australian Property Monitors is expecting median rents to rise by 5.6% to $380 for houses and by 7.5% to $360 for units throughout the year, with even higher growth expected into 2011.

Investors are advised, however, to be selective, as some types of properties in some areas will out-perform others. For further information and support, please contact your local Stockdale & Leggo agent.

The September 2009 quarter recorded higher than expected growth in property prices across all capital cities and all sectors. A jump of 4.2% in the national median house price was 2.6% higher than the previous peak in the first quarter of 2008. The pleasing result was also one that surprised analysts, who were expecting a gain of around 3%. 

Over the year to September, house prices jumped by 6.2%, according to the Bureau of Statistics, again substantially higher than the 4.3% expected. September quarter figures, on a state-by-state basis, saw Melbourne s house prices increase the most, by 4.7%, while Perth s gained 4.5%. Brisbane s property prices rose by 4.5%, while Sydney and Canberra s grew by 4.3%. Darwin s house prices gained 3.4%, while Adelaide s rose the least with an increase of 1.7%. 

Strong growth in the Australian property market, driven primarily by strong housing demand coupled with a severe shortage of supply, coincides with forecasts of exceptionally strong growth in the years to come, with leading industry analysts predicting increases in some capital cities of over 20% to 2012.

Other encouraging September indicators saw properties selling faster and vendors needing to move less on their asking price. The average level of discounting, which measures how much negotiation is taking place in the market, fell from 7% in 2008 to 5.4% in 2009, according to RP Data, suggesting vendors are re-claiming leverage as buyer demand increases.

While investment yields fluctuate somewhat over the short term, rental rates have recorded strong increases over the longer term, with the national average weekly rental rate increasing from $330 to $417, or 26%, over the last three years, according to RP Data.

The First Home Owner Grant Boost ceased at the end of 2009, with the grant (minus the boost) now reverting to its original level of $7,000 for an existing or new home. Potential first home buyers should stay abreast and take full advantage of all other government concessions and incentives. See www.firsthome.gov.au for more information.

It s good news on all fronts on the Australian property market. Figures released by RP Data saw national property values jump by 1.9% in August, bringing cumulative capital growth to 7.9% for the first eight months of 2009. Growth is being recorded in all sectors, including the upper end.

With the winding back of the First Home Owner s Grant Boost and the sector s
subsequent reduced activity, upgraders, or those buying a bigger, better second or third home, are becoming the new dominant force in the market. Investor activity too has substantially increased, with the Australian Bureau of Statistics reporting increases in finance commitments for investments, and the Real Estate Institute of Australia (REIA) noting that more investors are arranging finances in preparation for purchases in 2010 and 2011. Auction clearance rates remain strong, with the national average just below 80%.

While interest rates are slowly on the increase after five months at record lows, this too is a sign of better times and a strengthening Australian economy. Mortgage holders might respond by: exploring the rates, fees and overall payout figure with other lenders (while considering any exit or
establishment fees before re-financing); discussing options for the best possible deal with their current lender (with comparative data from competitors for more bargaining power); and looking to make more frequent (weekly or fortnightly) and ad hoc payments to reduce the size and longevity of their loan.

Today s promising trends within the property market are couched within a
broader Australian economy that s well and truly in recovery mode after a much less serious downturn than in the mid-1970s, early 1980s and the early 1990s, according to Reserve Bank Governor, Glenn Stevens. The worst has not occurred and the future is looking brighter, he stated. Stockdale & Leggo is delighted that the strong performance of the Australian property market over 2009 has also well exceeded expectations.

The property market is pleased to welcome investors back to the marketplace. The investor sector, according to RP Data, now comprises one quarter of all housing finance commitments.

Figures released by the Australian Bureau of Statistics in August also confirm increased investor activity. The major catalysts have been a healthy stabilisation of property prices, low interest rates (locked in with fixed rate loans), a slight decrease in competition from the first home buyer sector, and strong rental returns.

Nationally, rents increased by 1.4% (weighted average of eight capital cities) in the June quarter and increased by a very healthy 7.2% for the year, according to Consumer Price Index (CPI) figures and the REIA. The figures are consistent with very low vacancy rates and subsequent high demand for rental properties.

Those in a position to do so are well advised to take advantage of current favourable market conditions, especially as house prices, and possibly interest rates, are on an upward trend. While markets at the lower and middle end have improved, signs too of strengthening at the top end of the market have led RP Data to suggest that now may be the time to look to re-invest in top end property .

Stockdale & Leggo not only practises the highest levels of professional property management, but also recognises the importance of your investment for long-term financial security. For further information on how to best start, manage or grow your investment portfolio, please contact your local Stockdale & Leggo agent or see www.stockdaleleggo.com.au.

There is much optimism in both the property market and wider circles as key indicators point to a consolidation of the housing sector. Data released over the last few months by the Real Estate Institute of Australia, the Australian Bureau of Statistics and RP Data indicates good growth in vital areas that underpin the Australian property market: median house prices, auction clearance rates, investor activity, and finance commitment levels. Independent reports are confirming increased consumer, business, investor and vendor confidence. Combined with the property market s traditionally high levels of activity throughout spring, the real estate sector is poised for a promising end to 2009.

National median house prices are recovering nicely, with the resilience of the Australian property market evident through a 4.2% increase in the value of established homes over the June quarter. Prices rose in all capital cities, with Melbourne enjoying a 5.2% increase according to the REIA. Early evidence also suggests the top end of the market is improving and following the broader market into a recovery. These figures also reflect the combined efforts of government and RBA responses to a global financial crisis that still has some overseas markets floundering.

Housing finance commitments are also on an upward trend, with the value of loans taken out in June at their highest level for over two years, according to RP Data. Investor housing finance commitments have increased for four consecutive months to June. Auction clearance rates have been exceptionally strong over recent months, with RP Data reporting a national weighted average auction clearance rate nudging 80% for the week ending August 9th. There are indeed many promising signs of a vital, healthy property market ahead.

TIP: For important information about changes to the First Home Buyer Grant at the end of September and December 2009, please see www.firsthome.gov.au.

The extension of the First Home Owners Grant Boost brought first home buyers some very good news - and some extra time to secure
a well-supported foothold in the property market. It also brought great news for many associated industries and the Australian economy in general. The boost, introduced in October last year, doubled the $7,000 First Home Owners Grant to $14,000 for existing homes and trebled it to $21,000 for new homes. Originally scheduled to conclude at the end of June 2009, it has been extended in its current format until September 30th 2009, after which time it will halve until it is phased out at the end of this year. This basically means that between October and December 31st, eligible applicants buying existing homes will receive $10,500, while those purchasing newly constructed homes receive $14,000.

The boost has seen first home buyers flood onto the market, with a total of 44,487 first home buyers in the property market at the end of the March quarter, compared to 36,098 in the December 2008 quarter and 30,373 in the previous quarter. In addition to creating tremendous stimulus to the real estate sector,positive flow-on effects are being enjoyed by those that service the property industry, including the housing development and construction sectors and, according to the Real Estate Institute of Australia (REIA), solicitors, conveyancers, the loan market, valuers, removalists, furniture suppliers and various tradespeople.

In addition, Australia experienced its highest level of affordability in almost six years as at the end of the March 2009 quarter, due to a combination of record-low interest rates, government incentives and a changing market. According to the REIA, the national proportion of family income required to meet loan repayments decreased from 32.4% to 28.6%, providing some welcomed relief to those suffering mortgage stress. Australian property values, based on RP Data figures for the same quarter, increased by 1.6% - a very positive result, especially when compared to the US housing market, which fell 11.5% in March of this year. All in all, combined with healthy signs of increased investor activity, indications for a measured recovery in Australia s residential property market are strong.

Keeping a balanced, informed perspective and a level head when making property related-decisions becomes even more important during times of economic changeability. Some tend to adopt a ‘sit tight and do nothing approach, often driven by fear generated by ceaseless media pessimism. Without denying these challenging times, teasing out fact from fiction, remaining objective and adaptable, and making well-informed, strategic manoeuvres will see proactive individuals capitalising in today s property market.

At Stockdale & Leggo, we are pleased to report strong turnover, particularly from a First Home Buyer sector keen to snap up government incentives. Investors, also attracted by strong buying opportunities, are returning to the market. Potential sellers, however, many of whom are sitting tight, would do well to consider the bigger picture. While prices fell moderately over 2008, selling and buying in the same market generally procures the same net result; any losses incurred through selling in a lower market are re-couped when purchasing in the same market. The changeover figure may well be the same if conducting the same transaction in a buoyant market. The benefit of doing it now, however, is the long-term gain as the market improves, which is inevitable given the cyclical nature of the property market. It is not a matter of ‘if the market improves, but ‘when?

Also given interest rates at a 45-year low, sellers with secure jobs are in a better position than they might realise: now is an ideal time to upgrade to a larger, better home, re-locate or make that longed for sea or tree change. See your Stockdale & Leggo agent for important data on how particular suburbs have performed before, during and after economic downturns.

Now is also a good time to focus on one s own individual situation. With so much attention on external market factors, it s easy to become passive about one s own finances. Those who proactively take control of what can be controlled and think ‘outside the square will succeed. It s very pleasing to hear that some recently- unemployed people were delighted with their retrenchments, which provided a catalyst for realising their dream of starting their own business. Now, that s the spirit!