Market bottoming out, say experts

By Staff Reporter

Now is the time to invest despite two years of falling property values in Australia’s capital cities, according to Multifocus Properties and Finance’s CEO, Philippe Brach.

The latest RP Data-Rismark Hedonic Daily Home Value Index results show that in December, home values fell by 0.3 per cent across the country’s eight capital cities, amid weakening annual figures, down 3.8 per cent in 2011 and 0.4 per cent in 2012.

Mr Brach told Smart Property Investment that the decline is a natural part of the property cycle, and investors should take a long-term investment approach.

“Properties have been, on average, doubling every 10 years all over Australia. Obviously some locations are doing better than others,” Mr Brach said.

“At the moment, we should be below the long-term trend and it’s a good time to buy.”

In comparison to buying at the top of the cycle, Mr Brach said investors can achieve capital growth quicker by seeking opportunities when the market is at the bottom, and signs are pointing to the market being close to bottomed out currently.

“If prices are stabilising or going down a little bit, there are good opportunities to be had for good yield,” he said.

“If the market starts picking up, then hopefully you’ve already made the acquisition, and you just ride the wave, rather than wait like everybody else for the market to pick up.”

Investors who already have a portfolio may want to ensure they are astute with rental increases and, at the same time, look for further opportunities to buy.

In terms of capital cities, Mr Brach said there are very good deals to be had in Brisbane in particular, because it is showing significant signs of being near the bottom of its cycle.

“There are new buildings coming on stream in Brisbane, and developers are giving incentives such as furniture packages and paying for stamp duties.

“There’s less demand and they’re really trying to get these buildings completed."

Other capital cities, however, reflect a varied property market.

“Sydney is more steady and bubbling along a little bit,” Mr Brach said.  “Melbourne is definitely into correction phase, so there’s an oversupply of apartments there.”

Discussing the results Cameron Kusher, RP Data’s senior research analyst, said that despite Australia having seen two successive years of annual value declines, the annual rate of declines over 2012 has actually improved substantially compared to 2011.

“Capital city home values remain 5.7 per cent lower than their historic highs of November 2010, however, dwelling values are up 1.8 per cent from their low of late May 2012,” he said.

“Home values remain below their historic highs across each capital city and have increased at an average annual rate of just 1.9 per cent over the past five years. It is clear that the previous strong value growth conditions to which many homeowners became accustomed of recent years are well and truly behind us.

“Home values in Brisbane, Perth and Hobart remain below where they were five years ago, whereas the other mainland cities have all recorded significantly lower rates of growth in home values over the past five years than they did over the preceding five year period."

Although the standard variable rates have fallen by an average of 85 basis points over the past year and by 135 basis points since October of last year, the housing market has remained subdued over the year.

Mr Brach explained this is because the Australian market is driven by the market’s sentiment towards the global economy, such the US fiscal cliff.

“As soon as there is a glimmer of hope in the US, there is a recovery,” Mr Brach believes both market sentiment and housing prices will improve.

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