Australian Housing Outlook 2010 - 2012
By
Australian Finance Centre | Date: 12th November 2009
Interest Rates
The RBA have begun the process of raising rates from their highly stimulatory levels with an increase of the cash rate to 3.50% from November 4th 2009. Through the first half of 2010, the official cash rate is expected to remain at 3.5% to allow for stronger foundation to be established through an increased sentiment in both consumer and business confidence. However, this does not mean that the banks themselves will not lift rates outside the RBA due to the increased cost of external funding and the need to maintain their margins.
The cash rate is again expected to be raised from the second half of 2010 as signs emerge that the recovery is residential construction is sustainable, and is flowing through the remainder of the economy.
Given the current outlook, the cash rate is anticipated to be 3.50% at June 2010 and then increasing to 4.25% at June 2011, before increasing further to 5.00% at June 2012. Neverthelss, the variable housing rate is expected to rise from 6.3% at June 2010 to 7.45% by June 2012. This forecast assumes that some of the cash rate hike is not passed on by the major banks, as bank margins begin to fall back towards earlier levels.
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Property Prices
Following the economic environment and substantial property decreases in some parts of Australia during 2008 and early 2009, property prices have recovered over the second half of 2009 and are expected to continue increasing in 2010. Growth over the next 3 years by capital city and median house prices are forecasted to be:
• Adelaide: +23%
• Sydney: +21%
• Melbourne: +19%
• Darwin: +17%
• Brisbane: +15%
• Hobart: +15%
• Perth: +12%
• Canberra: +12%
Rental Markets
The vacancy rate in each city reflects the level of rental oversupply or deficiency. A vacancy rate of 3.00% in a market is considered balanced, where rents will rise roughly in line with inflation. Tight vacancy rates are expected to remain across most states in 2009/10, before easing subsequent years as the forecast upturn in construction adds to supply. This will continue to drive strong rental growth to at least 2010 and further more moderate, growth from 2011.
The highest rental growth over 2008/09 was seen in the ‘resource rich’ states of Darwin (13.1%), Perth (9.3%) and Brisbane (8.1%), reflecting the strong income growth that has been occurring in these cities over recent years. Solid rises in rents also continued in Sydney (7.1%), Canberra (6.7%) and Melbourne (6.1%), reflecting low vacancy rates due to increasing stock deficiency. Conversely, more moderate rental growth has been witnessed in Adelaide (5.5%) and Hobart (5.3%).
In the current environment of modest annual price rises over 2008/09, the strong growth in rents is resulting in an improvement in rental returns to investors. If you are considering making investments, contact us to see what investment options are available to you.
Renting vs. Owning
The ratio indicates that at June 2009, the median rent represented 65% of the cost of paying off the median priced house ‐ up from 42% at June 2008. The narrowed difference between renting and mortgage repayments has made owner occupation relatively more attractive compared to renting.
Following the economic environment and substantial property decreases in some parts of Australia during 2008 and early 2009, property prices have recovered over the second half of 2009 and are expected to continue increasing in 2010. Growth over the next 3 years by capital city and median house prices are forecasted to be:
• Adelaide: +23%
• Sydney: +21%
• Melbourne: +19%
• Darwin: +17%
• Brisbane: +15%
• Hobart: +15%
• Perth: +12%
• Canberra: +12%
The vacancy rate in each city reflects the level of rental oversupply or deficiency. A vacancy rate of 3.00% in a market is considered balanced, where rents will rise roughly in line with inflation. Tight vacancy rates are expected to remain across most states in 2009/10, before easing subsequent years as the forecast upturn in construction adds to supply. This will continue to drive strong rental growth to at least 2010 and further more moderate, growth from 2011. The highest rental growth over 2008/09 was seen in the ‘resource rich’ states of Darwin (13.1%), Perth (9.3%) and Brisbane (8.1%), reflecting the strong income growth that has been occurring in these cities over recent years. Solid rises in rents also continued in Sydney (7.1%), Canberra (6.7%) and Melbourne (6.1%), reflecting low vacancy rates due to increasing stock deficiency. Conversely, more moderate rental growth has been witnessed in Adelaide (5.5%) and Hobart (5.3%). In the current environment of modest annual price rises over 2008/09, the strong growth in rents is resulting in an improvement in rental returns to investors. If you are considering making investments, contact us to see what investment options are available to you. The ratio indicates that at June 2009, the median rent represented 65% of the cost of paying off the median priced house ‐ up from 42% at June 2008. The narrowed difference between renting and mortgage repayments has made owner occupation relatively more attractive compared to renting
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