NEXT BOOM WAITING IN THE WINGS?

27th Mar 2009

Investor numbers were up nearly 3% after bottoming out right at the end of last year.

There’s broad awareness of the conventional wisdom suggesting share market crashes are followed by an inevitable flight to property, the safe bet in uncertain times.  Following falls of 20% in the value of commercial property trusts in the last quarter of 2008 alone, statistics showed housing prices in major capital cities edged down only as much as four% – and that was across the full twelve months. In Sydney, where signs of a recovery are first expected to be seen, falls were limited to less than one%.

During share market downturns, business is forced to tighten its belt and curtail expansion plans, directly affecting demand for the commercial sector i.e. office space, factories and industrial complexes. Therefore yields from, and values of commercial property trusts, weaken.

This is where history dictates the residential market behaves in the opposite fashion.

With our economy edging toward recession, as announced by the Prime Minister over last weekend, business turnover could soften and the share market fall further. Business will naturally cut costs by shedding employees and the RBA will, possibly, cut official interest rates further,

to try and keep the economy moving – as predicted in First National’s Property Outlook 2009.

With record low interest rates, residential housing is rising in affordability and while unemployment will have a negative affect, most economists

predict it will only rise to between 7-8%, which is back where it was in 2001 – the start of the last property boom.  

For those that have job security, property becomes a viable investment option.

Real estate holding costs are about a tenth of what they were a year ago and rents have been rising rapidly in capital cities. In some regional areas across Australia, positive gearing is a new reality and there’s been a quiet return of investment buy-to-rent players. Missed by the general media as First Home Buyers are the story of the day, investor numbers were up nearly 3% cent after bottoming out right at the end of last year.

Those wanting the highest returns are heading for coastal Queensland and Victoria’s wheat belt. Apartments in Sippy Downs on Queensland’s

Sunshine Coast offer the nation’s best gross rental yield of 10.53 per cent. Most units are situated next to the University of the Sunshine

Coast and this pushes up rents. Six out of the top ten suburbs for apartment yields are in Queensland’s coastal areas. The majority of the other top ten are found in regional mining centres.

Dampier and South Hedland (South of Port Hedland) in the north west of Western Australia have benefited by the huge rents paid by mining employees, as have the Queensland towns of Mackay, Bucasia and Blacks Beach. However, there are doubts that this can be sustained with the resources boom subsiding rapidly.

The laws of supply and demand will always rule the day and Australia shows no sign of solving its unique housing shortage in the near future.

With many white collar jobs being lost in the investment banking sector, demand for expensive inner city apartments may weaken, but this only makes regional areas even more attractive for savvy property investors.

Article Source : Di Wagner First National Real Estate