Positive Trend in All Markets while Perth
Comes Off the Boil
The position of the market has not changed substantially since we released our October figures.
Houses in each capital city showed positive growth, with the exception of Hobart.
These figures are a very positive indication that the markets in most states have started to move again, with more optimism being shown by buyers.
Given that we have had a rate rise in recent months, the fact that the figures indicate little sign of a slowing in the growth rate is a remarkable outcome. This is good news on the economic front, and puts paid to the theories floating around recently that suggested the second rate rise would have a devastating impact on the Sydney market.
The reason for the continued increase in prices is a supply issue (ie not enough properties available). This is evidenced by the rising weekly dollar rentals.
Actually, the unexpected high rates of growth at this time may be some cause for concern, particularly for governments, who will be uncomfortable with the inaffordability of housing at both an owner and tenant level.
While Sydney looks to be performing very poorly, in many respects, this is probably one of the least risky markets to enter. This is because rents are rising, indicating demand and price growth is such that investors will be able to find bargains and negotiate sensible prices.
However, Perth looks set to slow. The dark cloud on the horizon remains Perth, which is showing all the attributes of a market which is about to enter a period of correction.
We are not suggesting that the Perth market will bust. We are suggesting, however, that compared with the other states at the end of their market cycles, Perth is showing a much higher level of risk. Their current growth levels were dependent upon an inability to provide supply needs in the short term.
However, this situation is reversing because there is now increasing capacity in Perth to provide new homes as needed. Without the scarcity of supply, the main driver of growth will be removed.
Perth will be attracting the attention of investors, but should also be an area of concern. While the figures in the table above show that Perth is still growing positively, other statistics we have on the area clearly show that the best is over, and correction is on the horizon.
To the non-statistician, the declining sales volumes are the most obvious pointer to a slowing market. (The number of sales of houses in Perth for the quarter ending November 2006 is some 16% lower than the same period last year.)
Full analyses and statistics of all the state property markets are provided in each state's individual Residex Report. The September 2006 quarter editions of these reports are now available for all states in Australia.
The table below shows the latest median values, growth rates and rental yields for the month of November 2006. The growth rates are calculated using our non-revisionary repeat sales method.
Houses
Units
We have also just released the January 2007 edition of its Best Rent Report. This contains all the information you need to find properties with high rental returns in Australia.
We have compiled together a list of the 100 best suburbs where the rental yield is greater than 4% pa and the predicted capital growth is greater than 4% to give an expected total return of over 8% per annum.
In addition, in every one of these suburbs, our research staff have spoken to real estate agents and researched the area to give you the most detailed report Residex has ever produced. With rental opportunities becoming increasingly scarce, it can be a lot of hard work finding the right area to invest in. But with the Best Rent report, Residex has done the work for you.
You can out more about the Best Rent Report at http://www.residex.com.au/newsletter/source.html
John Edwards
CEO
Residex
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