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The residential property market will bounce back in 2012, experts say, so if you’re aiming to buy make your move early, writes Phillip Tarrant
The latest RP Data-Rismark Home Value Index shows capital city home values just had their best result in seven months – down by just 0.2 per cent.
Meanwhile, regional house values actually managed to increase, growing by 0.1 per cent.
The Index shows the September 2011 monthly decline was actually the smallest since February that year and was crucial in reversing a trend of accelerating capital losses since the end of March 2011.
On an even more positive note, strong rental growth, which according to the Australian Bureau of Statistics expanded by 1.2 per cent in the September quarter and by 4.6 per cent over the year, has meant gross total returns for home owners have actually been positive.
Rismark’s executive director, Christopher Joye, says interest rate fears have kept potential home buyers on the sidelines for most of 2011.
However, if rates move downward in 2012, that would kick off a recovery in housing activity, he says.
The Index also shows – unsurprisingly – that the two worst performing capital cities in September were Canberra and Sydney, suffering falls of 0.5 per cent and 0.6 per cent respectively.
This represents a reversal of sorts, given that Sydney and Canberra have had the shallowest peak-to-trough falls of all the cities.
“Over the first nine months of 2011, capital city home values are down 3.6 per cent with the largest falls registered in Brisbane (5.6 per cent, seasonally adjusted) and Melbourne (5.2 per cent seasonally adjusted).
“The most resilient markets continue to be Canberra, Darwin and Sydney where values have fallen by a very modest 0.5 per cent, 1.5 per cent and 1.7 per cent, respectively,” Mr Joye says.
Between January 2007 and January 2011, Melbourne house values rose by 49 per cent; in 2011, they were down by about 5 per cent. This is possibly because they overshot fundamentals in the preceding period.
“Housing market conditions are starting to show some green shoots now, at least at a macro level. [The September 2011] 0.2 per cent result was the best outcome we’ve seen in seven months,” he says.
Property investors will no doubt be buoyed by news of growth, albeit small, but there’s still uncertainty in the market with a lack of confidence and a degree of caution in play for many investors.
While markets by and large have been subdued this year, indicators do point to growth in 2012, and investors should be prepared to move when they uncover good buys.
According to RP Data’s research director, Tim Lawless, auction clearance rates have remained relatively stable around the 50 per cent mark across the two largest auctions markets, Melbourne and Sydney.
In addition, the average selling time for private treaty sales remains below two months across the combined capital city markets, and vendors are providing a slightly lower level of discounting.
It’s probably too early to say whether this may indicate a turnaround, but markets are going to lift and the leverage that investors have had over the past six months to a year on price discounting will decrease.
It’s simple: if you can afford to invest in property now, do so.
Market conditions still favour the buyer; if you’ve got the drive to do the research in the markets in which you want to invest, appreciate local market dynamics and ensure you understand how you can add value to the properties you’re buying to increase rents or value.
The onus is on doing the groundwork and making informed, educated and confident decisions. Also, importantly, get your finances in order now and a pre-approval arranged. If you can enter any negotiation confident in your finances you’ll drive a much better deal – and reduce your stress levels!