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Opinion

House prices now ‘unaffordable’ for many average Australians

House prices

A sobering report by real estate professionals has said property prices are “increasingly unaffordable” and Australians may never own a home.

First time home buyers are all too aware buying their first pad right now is a struggle.

Now that’s been confirmed by the industry itself with real estate professionals darkly warning large numbers of “average” Australians “may never be able to enter the property market” given the inexorable rise in prices.

That sobering residential reality comes as it was confirmed Sydney house prices had soared. The average house is in the Harbour City is now going for $1.1 million with units at $800,000.

A typical Sydney house is now about $117,000 pricier than it was at the end of February. Industry organisation the Australian Property Institute (API) and tech firm The Search People surveyed almost 600 property valuers across Australia to gauge their attitudes to the property market.

Property valuers conduct detailed inspections of homes, looking at the number of rooms and size as well as a property’s condition to ensure it’s fit to be bought or sold, is priced correctly and if any improvements need to be made to make it market ready.

Almost half think property ‘unaffordable’ for average Australian

The report found 59 per cent of valuers believed the Australian housing market was currently in a bubble. While 55 per cent thought most homebuyers were over capitalising on their purchase.

Most damningly, 43 per cent of valuers said property was now essentially out of reach for the “average” Australian.

“The likelihood of owning a home is becoming increasingly low as residential property becomes unaffordable for the average Australian,” the firms stated.

“Aussies may never be able to enter property market.

 House prices

Almost half of property valuers believe property is unaffordable for the average Australian. Picture: Australian Property Institute/The Search People.Source:Supplied 

“Professional valuers believe Australia’s residential real estate prices will continue to rise despite serious affordability and sustainability concerns,” the report added.

There may be a bubble, but in the short term at least that bubble doesn’t seem set to burst, said The Search People’s Rafe Berding.

“Most respondents believe a boom is set for the Australian property sector, however the majority also believe Australia is currently witnessing the makings of a property bubble.

“A combination of record low interest rates and buyers’ uncertainty of investing in other alternatives is fuelling high demand. This coupled with low supply is driving a ‘fear of missing out’ for many buyers.

“As a result, in some cases, properties are being snapped up significantly above the asking price within moments of being listed,” he said.

 House prices

Property values are predicted to surge, particularly in Brisbane. Picture: Australian Property Institute/The Search People.Source:Supplied 

Sydney, Melbourne, Perth seeing the strongest growth

Almost two-thirds said they saw “continued strong growth” for property values across Australia’s six main capitals in the next six months.

The report said this was a “worrying” trend that would disadvantage many prospective buyers.

More than 60 per cent of those surveyed in Sydney, Melbourne and Perth said they expected prices to rise. In Brisbane, it was even starker with 70 per cent believing a price jump would occur with around 12 per cent of those saying prices in the Queensland capital could go up by more than 10 per cent.

Adelaide is the most affordable capital, but even here more than 55 per cent of valuers have said the only way is up for house prices.

API chief executive Amelia Hodge said the market was firing on all cylinders.

“With record low interest rates, we’re seeing more and more buyers entering the market.

“This is great news for Australians selling property, especially with values on the rise in most sectors and selling times decreasing across most capital cities.”

More than half of those surveyed said Australians should be allowed to access their super to pay for property.

Sydney average house price now $1.1m

Data from property research firm CoreLogic, released on Tuesday, showed prices for all categories of housing rose 3 per cent for the month – one of the largest monthly rises on record.

The median price of a Sydney house is now $1.186 million, while the median unit price is $782,000, according to the data firm.

CoreLogic head of research Tim Lawless said the median house price would likely hit the $1.2 million mark soon – even as early as next month. “It wouldn’t take much growth, it’s nearly there,” he said.

May’s bump in prices was a modest slowdown from March, when values climbed at the fastest pace in 32 years, but the growth still dwarfed price rises across the rest of the country.

Sydney’s price rise was 66 per cent higher than in Melbourne and about 36 per cent higher than the national average.

Mr Lawless said he expected rises to moderate over the coming months as buyers became priced out of the market.

“It will reach a point where fewer buyers can compete,” he said.

Housing supply was also beginning to increase in many suburbs and a further increase would take pressure off of buyers to bid up prices.

A shortage of listings had been one of the biggest drivers of the recent price boom, Mr Lawless said.

Backing up the API report that Perth is set to for a big rise in prices was an analysis by comparison website Finder.

In Perth, property prices were predicted to rise by 8 per cent over the next seven months, adding almost $80,000 to the value of properties, giving them an average value of $609,000.

Australian Bureau of Statistics data from April showed the average deposit needed to secure a mortgage was $106,743 – an increase of 16 per cent since January 2019.

The ACT had the largest home deposit increase since 2019, with the upfront amount required swelling by 24 per cent to $117,790, followed by NSW – up by 23 per cent to $128,469.

 

Article Source: www.news.com.au

Gold Coast

“2021 saw an insatiable appetite for off the plan projects in premium locations.” Five Minutes with Paul Geduon from S&S Projects

SS Projects

It was a stellar 2021 for the Gold Coast apartment developer, S&S Projects.

They sold out Awaken, their Rainbow Bay project of just nine apartments, with a top sale of $8.15 million secured for the penthouse, which was bought by a US couple.

Their nearby project, Esprit, is over 80 per cent sold, and there are plans already on the desk of the Gold Coast City Council for their next project, a rare mixed-use apartment and hotel development in Palm Beach.

Urban recently caught up with S&S Projects director Paul Geddoun to discuss the Gold Coast apartment market.

JC: How did you view the performance of the off the plan market in 2021, and what are the strongest positive and negative factors that will influence outcomes in 2022 and 2023?

PG: 2021 saw an insatiable appetite for off the plan projects in premium locations.

Although the less premium project markets has been strong, the price growth has not been at the same level as premium projects. Sales volumes at record pricing in premium projects is unlike anything we have seen previously.

Esprit

Esprit 217-227 Boundary Street, Coolangatta QLD 4225 

We expect the market to remain strong in 2022 and 2023 however the growth will not be at the same level as there was a little bit of catch up along with more limited stock which has driven these markets at these levels where there is no more projects available and increased competition which will slow the growth.

The negatives are that there has been a shortage in materials and labour due to border restrictions along with globally driven stimulus which has put excess funding into the market with international infrastructure upgrades for job creation to stem any recession fears as a result of Covid which has forced up the cost of construction which may cause some project issues.

JC: What trend (short term or long term) has prompted your greatest enthusiasm for the apartment market, and what is the issue of most concern to you and or your clients?

PG: In general, real estate has seen great growth which has provided many with increased equity which has driven decisions for holiday homes and downsizing into apartments. The greatest concern in the near future is interest rates and people being overextended.

JC: Has urbanisation stalled amid the rush to the regions and what will it look like over the decade ahead? 

PG: I think urbanisation is strong with price growth and competition allowing developers to create better built form outcomes and develop sites in areas where the feasibilities once didn’t allow it.

I think the future looks strong for many new areas that have been the recipients of this higher-grade development creating better urban areas.

JC: How important do you view the push for sustainability practices in the apartment market, and what initiative has seized your interest or focus? 

PG: There is a strong focus on sustainability, and this is being most represented in the fixtures and fittings being installed which are more efficient and it is also common practice to place as much solar on the roof of project to assist in the ongoing sustainability and costs of the operating buildings.

 

Article Source: www.urban.com.au

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Opinion

How home loan mortgages rose in 2021 to record levels

home loan

Lender records were broken in every state and territory except WA, according to the ABS data

Purchases by NSW owner occupiers came with mortgages sat at around $770,000, according to the latest lending data.

The national average mortgage size for owner-occupiers has reached a record high of $595,568 according to ABS data.

Records were broken in every state and territory except WA.

The national mortgage was up $92,404, an 18% hike over the year.

The November ABS Lending Indicators, released 14 January, advised the loans were for the purchase of new and existing dwellings.

The national average mortgage size for owner-occupiers has reached a record high of $595,568 according to new ABS data out today.

Records were broken in every state and territory except WA, according to the ABS data in original terms.

Victorian home buyers saw the biggest jump in their mortgages, up 24% or $120,000 to $618,602.

Average new owner-occupier mortgage size, November 2021

Amount Year-on-year change
National
$595,568 $92,404 18.4%
NSW
$769,459 $125,112 19.4%
Vic
$618,602 $120,032 24.1%
Qld
$513,649 $73,604 16.7%
WA
$439,578 $22,868 5.5%
SA
$421,801 $38,016 9.9%
ACT
$585,859 $58,434 11.1%
TAS
$445,915 $73,175 19.6%
NT
$433,333 $53,271 14%

“Demand for Aussie housing remains firm, but affordability has decreased because home prices have surged more than wages,” Ryan Felsman, senior economist at CommSec noted.

“In November housing stock was high and the country’s two largest states were freshly out of lockdown, so it’s no surprise to see a rise in new lending,” RateCity.com.au research director, Sally Tindall, said.

“Growth in property prices is starting to slow on the back of fixed rate rises and a crackdown by the regulator, but the opening up of borders this year will increase demand, keeping prices moving north,” she forecast.

The data did not include refinancing, nor renovation loans.

Renovation loans surged by 18 per cent in November to a record $569 million. The value of lending for renovations is up by a massive 115 per cent on a year ago.

Canstar analysis showed Australian mortgage holders refinanced $15.72 billion worth of loans to a new lender in November 2021, down 2.3% from October.

 

Article Source: www.urban.com.au

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Opinion

Should you buy that investment property this year?

investment property 1

Property investors are set to snap up homes and apartments across Australia in 2022, as interest rates remain low and rental vacancy rates continue to tighten.

But experts are forecasting it won’t all be smooth sailing, as future landlords face the uncertainty of both federal and state elections, with housing policies that are yet to be defined. They also face possible interest rate hikes, which are looming on the back of inflationary pressures.

While interest rates may not rise immediately, tighter lending rules introduced in 2021 have already made it tougher for investors to get a mortgage, Loan Market Mortgage Broker Daniel Koutsamanis said. But that hadn’t yet had a major impact on the number of people looking to invest.

Changes to loan rules, including the calculation of debt to income ratios, (the amount someone can borrow depending on their earnings), and of interest rate buffers that determine if a borrower can afford a mortgage if interest rates rise by 3 per cent, had seen the amount that could be borrowed fall by between 5 and 10 per cent.

“Budgets are coming down a little bit, but there hasn’t been a drastic change,” Mr Koutsamanis said. “There’s still a fairly decent amount of confidence, with clients wanting to invest. The sentiment is still pretty decent, pretty strong.”

That confidence follows a stellar year for investors, with the number of new loan commitments jumping by 89.6 per cent across the year to October 2021, Australian Bureau of Statistics figures showed.

There was $9.73 billion of new loan commitments for investment properties in October alone, the data showed, despite the hit to rental markets in both Sydney and Melbourne over the year.

Rents in Melbourne dropped significantly over 2021, making it one of the cheapest capital cities to find a rental property. Apartment rents dropped by 7.5 per cent across the year to September and house rents fell by 2.3 per cent, Domain figures show.

Sydney apartment rents fell by 2 per cent over the same period, while house rents rose as people looked for bigger properties during lockdown.

investment property

Tenants have flocked to Queensland to escape lockdowns. Photo: Domain 

Both markets rely on overseas migration to help fill rentals, including international students who were kept out of the market because of the COVID-19 pandemic.

Unlike Sydney and Melbourne, Queensland saw an influx of new tenants and new buyers, moving away from lockdowns in both cities.

Mr Koutsamanis said some investors were still looking at buying in Queensland, where the vacancy rate has dropped below 1 per cent and is just 0.5 per cent on the Sunshine Coast, according to SQM Research.

A rise in tenant numbers is now predicted in Sydney and Melbourne as international borders reopen to overseas students, workers and tourists, providing opportunities for investors across the country, Sydney-based Aus Property managing director Lloyd Edge said.

“With the international borders reopening, there is opportunity for more growth, with students returning at the moment. I think the properties in the city might start to come back,” Mr Edge said.

Demand for Airbnbs could also return, offering investors a way back into the short-stay rental market, Mr Edge added.

While rents may improve slightly with borders reopening, they would stay lower until migration returns to normal levels and investors would need to think about the long term, keeping properties for at least 10 years, said Melbourne-based buyers agent Wendy Chamberlain.

“Over time, real estate is a forgiving investment, so investors do need to look to the long term. They need to buy assets that can weather the storm rather than be hard hit, like student accommodation.”

Ms Chamberlain said looking further out of the city, and in regional areas, where investors could buy a bigger property with their money would help attract tenants looking for more space.

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