2011 is the Year to Buy for Investors & Upgraders
With the market not really waking up until the 1st of February it is very hard to give a property market update for February, so I thought I would attach for some interesting reading information that ANZ Economics Markets Research has put out this month on the Housing Snapshot for NSW which was produced and published on 24th January 2011.
Please note that they have forecast for vacancy rates to head below 1% in the second half of the year which is unheard of, and the rental growth to be in the double digits.
They also said perceptions that national house prices are overdue for a major correction are misplaced with structural drivers and that we are just not building enough houses to satisfy the growing demand.
Perceptions that national house prices are overdue for a major correction are misplaced with structural drivers
'explaining' the observed house price outcomes to date. For more detail, refer to “ANZ Housing Overvaluation”.
The national economy lost considerable momentum over the back half of 2010 but by year's end is expected to be on track once again to achieve trend rates of growth. The lagged effects of rising mortgage rates will maintain a reasonable headwind, inhibiting the much needed recovery in dwelling construction over 2011 and into 2012. Builders will remain cautious while margins are vulnerable to sluggish house prices. Dwelling starts are projected to decline from 149,000 in 2010/11 to 131,000 in 2011/12 before recovering gradually, a far cry from the 180,000+ dwellings required to merely stabilise the shortage at its already record high levels. This market imbalance is expected to reveal as an acceleration in rentals growth and renewed tightening in rental vacancies. The market tightening process had already commenced in 2007 but was interrupted by accommodating policies to combat the impact of the GFC on the domestic economy. By 2011, a re-emergence of market tightening should become apparent, which will once again establish the pre-conditions for a recovery in prices through 2012.
The economic environment in NSW has remained relatively healthy with the economy expanding by 1.7% over 2009/10, supporting house price growth of 5.7% over the year to November, although interest rate rises have tempered price growth more recently. Finance approvals have fallen by 13.5% since July 2009 whilst clearance rates, which were hovering in the vicinity of 70-80% at the beginning of the year, have regularly fallen below 60% over the second half of the year. Fundamental conditions in the Sydney housing market remain tight, with dwelling completions running at a meagre 26,000 (around half the levels of a decade earlier), well below underlying requirements. Indeed, the chronic NSW housing shortage will continue to accumulate to remarkable levels. We expect competition in the rental markets to intensify, with vacancy rates forecast to head below 1% in the second half of the year. Rental growth will be close to double digits by the end of 2011, challenging rental affordability, but signalling support to the market over the medium term. In the near term, we expect the cyclical upswing in interest rates to put a cap on house prices and anticipate modest growth of 2% in 2011.
PK's Property Market Predictions for 2011
Heading into 2011 I am predicting a flat market for high end property, but for houses on the Lower North Shore and Upper North Shore up to $2 million and Eastern Suburbs up to $2.5 million I believe the market will move upwards of 7% over 2011 in certain locations. Units up to $800,000 in Eastern Suburbs and Lower North Shore will perform well allowing investors to come back into the marketplace and take advantage of rising rents and low vacancy rates. Units in these areas will have approx capital gains of around 5% to 7% depending on supply.
The Inner West up to $1 million in houses will also perform well, and depending upon stock levels should show gains of between 5% and 10% throughout 2011. Units in these areas will be fairly stagnant but rents will be strong.
The Northern Beaches will see houses in the Freshwater, Balgowlah and Manly area have rises of around 5% to 7% for quality property up to $2 million and moving up the peninsula to Palm Beach a fairly flat market.
Overall it will be a fairly stable market with more competition assured in the banking space for 2011 keeping interest rates around about where they are now. This all makes it a nice market to buy and sell in without the huge rushes experienced in 2009 and early 2010.
PK's Hot Tip
You heard it from me the Landlord is now king again and there is no better time to buy an investment property than now. The new Residential Tenancy Act for NSW has come in on the 31 January 2011 and there are some significant changes so either speak to your property manager or go to the fair-trading website for more information. You will find that the changes will not affect investors too much at all.
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