property investing blogs

Those considering property investment in Australia may be encouraged by recent activity in the real estate market.

Figures from the Australian Bureau of Statistics report a national average rise in the number of home lending approvals for the March quarter.

This means industry confidence is building, which may support further improvement as the year progresses.

The Housing Industry Association (HIA) commented that the increase, while modest, was a positive sign for the sector.

"The number of loans for the construction or purchase of new homes lifted by 3.5 per cent in the month of March, which is a welcome piece of good news given the existing weak conditions facing the new home building sector," said HIA senior economist Andrew Harvey.

"However, while the 50 basis point rate cut was the correct call, more is needed in terms of further rate cuts and also housing supply reform by the state and Federal governments," he added.

Property industry experts are disappointed with the recently announced federal budget, positing that it does not account for residential housing difficulties facing the country.

The Housing Industry Association (HIA) claims that the budget failed to address housing shortages, real estate affordability and weakness in the construction industry.

HIA's senior economist Andrew Harvey referred to the decision as a missed opportunity.

"At a time when new home building is in decline in virtually every state and territory, the budget has failed to deliver any new measure to reinvigorate the home building sector, despite the sector's health being absolutely crucial to a healthy domestic economy," he said.

The Residential Development Council (RDC) was similarly displeased with the 2012 budget, directing its main criticisms towards the affordability issue.

RDC executive director Caryn Kakas expressed concern that housing was not given due consideration in the allocation of resources.

"We need to ensure an adequate supply of affordable homes for our most vulnerable citizens and across our communities," she said.

Resource growth in Western Australia has led to commercial expansion, employment opportunities and business activity that continue to exude economic potential.

Recently released figures from the Real Estate Institute of Western Australia (REIWA) have revealed high demand for rental accommodation over the March quarter and a resulting increase in weekly rental fees.

REIWA president David Airey said the urban market saw some of the strongest movement in the three months from January.

"The median rent in Perth lifted by $20 to $400 per week, or five per cent from the end of last year.

"This has been prompted by a tightening of the vacancy rate to 1.9 per cent, well under the accepted equilibrium of three per cent," he said.

Investors looking to enter the market may see high returns as commercial business continues to expand and more people flock to the area.

However, housing prices are also on the rise, so swift action may lead to more favourable long term results.

Recent figures from the Australian Bureau of Statistics reveal that residential housing approvals are down in the Northern Territory - a condition that is causing concern for certain bodies of the nation's property industry.

Total figures reveal that approvals have fallen by 13.3 per cent in March to be down 32.5 per cent since the same time last year.

The Housing Industry Association (HIA) is deeply concerned that the drop will affect housing as the economy experiences rapid growth.

HIA state executive director Robert Harding reported that building approvals are 45 per cent below average.

"The Northern Territory is about to experience an unprecedented level of investment as the Inpex project gets underway.

"A growing population and recent unwise legislative changes will see immense pressures on the already strained demand for housing," he suggested.

Those considering property investment in the region may benefit from the potential shortage - as more residents flock to the area for employment and commercial opportunities, greater is the demand for rental accommodation.

Those thinking about property investment may wish to consider building a home instead of buying real estate.

With subdued growth in the construction industry, availability of skilled labour has gone up and prices for labour and material have become more affordable.

Recently lowered interest rates should also contribute to favourable buying conditions - the Reserve Bank of Australia just slashed the official cash rate by 50 basis points to 3.75 per cent.

New South Wales

The Housing Industry Association (HIA) recently reported subdued land sales for the state of New South Wales, reflecting favourable conditions for residential home builders.

Investors who have been sitting on the sidelines may wish to get back into the real estate market, following a recent announcement from the Reserve Bank of Australia (RBA).

RBA governor Glenn Stevens reported that the official cash rate was to be cut by 50 basis points to 3.75 per cent, effective May 2.

In a statement, Mr Stevens referred to sluggish performance in certain sectors - including the housing industry - and a general economic condition that demanded such action.

While the combination of lower interest rates, affordable prices and projected growth offer lucrative options for property investment, there is some concern that borrowers will not see the benefits of such reduced rates. 

Mr Stevens acknowledged that lenders have been keeping interest rates high, despite the actions of the RBA.

"As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books."

Recent figures from the Real Estate Institute of Queensland (REIQ) indicate low rental vacancy rates across the state.

Released on Monday (April 30), the REIQ March residential vacancy data indicates high tenant demand and availability below the market equilibrium of three per cent.

For those considering property investments in Queensland, these numbers are a positive sign of market revival.

REIQ chief executive officer Anton Kardash commented that the slower sales activity of the last year contributed to the tightening of the state's rental supply.

"Until very recently, we had many potential first home buyers and investors sitting on the sidelines while our market and economy recovered from the natural disasters last year, which has put pressure on our rental market," he said.

Back in 2001, my business partner and I were running our accounting practice and property investing company out of a concrete block garage up an alley way in Mont Albert. 

The "office" was freezing cold in winter, boiling hot in summer.

But at the time, literally every dollar we made from our accounting practice was being invested straight into property.

We were working anything up to 16 hour days - and when we weren't up to our necks in other peoples' tax returns, we'd drive to Ballarat to pick up a paintbrush and do some renovations until late in the night.

All of our groceries, rent, and bills were paid out of our wives' salaries - so lunch was often 2 minute noodles and broccoli.

Nothing was going to stop us from achieving our property investing ambitions...

But it really wasn't fun. And I don't think I'd recommend what we did is a good way to invest. It just wasn't sustainable.

We Had To Find A "Smarter Way"...

An important factor that pertains to property investment, commercial expansion and economic growth is consumer confidence.

Sometimes favourable conditions in the market are not enough to bolster activity - residents need to feel assured that if they start investing their money in new projects, they will achieve positive returns.

Fortunately, New South Wales seems to be making gains in this regard.

The Property Council of Australia-ANZ Property Industry Confidence Survey released last week (April 19), revealed an increase in confidence from the March quarter to the June quarter.

The analysis measured responses from more than 2,300 construction and property professionals all across Australia - with 622 from NSW - and revealed an index that rose from 105 points to 113.

Property council acting NSW executive director Edward Palmisano was pleased with the report and credited the positive results with a better outlook on the world stage.

Those considering where to direct their investment funds in Australia may find what they are looking for in the Northern Territory.

A recently-released Deloitte report (April 24) has forecast economic growth in the state to increase by 4.4 per cent over the next five years.

The Deloitte Access Economics' March quarter 2012 Business Outlook indicates the Northern Territory as the second fastest growing state in Australia and deemed its performance above the national rate of 3.2 per cent.

"This growth is expected to be driven by private construction investment, private housing investment and international exports," said territory treasurer Delia Lawrie.

The population is also expected to grow by 1.8 per cent in the same time period, increasing market size and encouraging further development.

Meanwhile, the NT government is also committing $28 million dollars towards upgrades to road infrastructure in the region.

The funds will go towards infrastructure, road safety, flood prevention and other key areas of road construction.