Sunshine Coast property market strong, says Matusik

November 20, 2008

Property expert Michael Matusik was surprised to discover strength in the Sunshine Coast property market when researching the presentation he gave at this morning’s Urban Development Institute of Australia annual general meeting.

The straight-shooting analyst said the market is “surprisingly strong”, property prices will experience growth and that affordability will improve.

“2009 is going to be brighter than 2008,” he said.

“Price growth of around 5% will occur throughout next year, and 10-12% in 2010. “But the top end of the market will be difficult and sales volumes could be half of what we’ve seen in recent years, until the share market recovers.”

Mr Matusik said the fundamentals (population, economy, employment, supply) were all “quite good”, but certain issues loomed as potential problems.

“Affordability is an issue, but it has improved dramatically with declining interest rates, the first home buyers grant, the fiscal package, tax cuts and wage increases,” he said.

“Another issue is the amount of urban consolidation and sorting out what the market wants, versus the planning rhetoric.

“There is a desire to have a lot more urban consolidation, but a lot of the population do not want to live in apartments. There needs to be more subdivisional-type approvals and developers need to rework their existing developments to include tighter stock in the apartment product.”

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Too much Seachange?

November 18, 2008

The National Sea Change Taskforce will be represented at this week’s inaugural meeting of the Australian Council of Local Government in Canberra on November 17 and 18.

Sunshine Coast councillor Debbie Blumel, one of two Queensland representatives on the taskforce, said representatives have been invited to participate in the inaugural meeting.

“The National Sea Change Taskforce will be presenting four priority issues which we believe are important to Australia’s coastal communities,” Cr Blumel said.

“The current rate of growth in Australia’s non-metropolitan coastal areas is not sustainable. Coastal councils and their communities are attempting to deal with extraordinary pressures but do not have sufficient resources to keep pace with increasing demand associated with growth.

“As a result, there is a significant backlog of unmet demand for community infrastructure and services in these communities. Apart from population growth, coastal communities face the added impact of increasing levels of tourism and the potential impact of climate change.

“The taskforce believes the following four key issues need to be addressed through appropriate policy initiatives as a matter of urgency:

-Investing in local, regional and national infrastructure.

-Adapting to our changing local environment.

-Strengthening regional economies, including broadband and communications.

-Improving wellbeing in our communities.

The taskforce will consider a detailed discussion paper before presenting to the Australian Council of Local Government today.

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Interest Rates cut to 5.25%

November 4, 2008

The Reserve Bank cut its key interest rate for the third month in a row as it attempts to prevent Australia’s economy stalling.

The central bank trimmed three-quarters of a percentage point - or 75 basis points - off its key cash rate, reducing it to 5.25%, the lowest level since December 2003.

For a typical 25-year, $250,000 home loan, today’s cut if passed on in full by lenders will save the borrower $112.63 a month in payments or some $33,791 over the life of the loan.

The move, announced after today’s monthly board meeting by the RBA, exceeded economists’ predictions of a 50 basis-points cut.

Today’s cut brings the RBA’s cuts to 2 percentage points since the central bank reversed course in September, retreating from a 12-year high rate of 7.25%.

The RBA will be hoping that the big commercial banks will repeat last month’s feat of passing on all of the official rate cut to borrowers.

Lower lending costs help spur the economy by encouraging more individuals and businesses to purchase houses or make other investments, stoking demand that in turn prompts more orders.

Almost all the latest economic figures point to a sharp slowdown in demand as the effects of the global financial crisis spread to Australia. Falling commodity prices are already dimming the outlook for the mining and export sectors.

Retail sales shrank 1.1% last month from September, the largest drop since April 2005, as consumers start to pull back on spending.

House prices, another measure of the economy’s health, fell 1.8% in the September quarter, the sharpest slowdown since the 1970s, according to some reports.

Job ads, one indication of future employment opportunities, also slumped last month and are now about 10% lower than this time last year.

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Sunshine Coast defies slowdown

November 3, 2008

Billions of dollars worth of projects are being prepared or rolled out across the Sunshine Coast despite the global economic meltdown.

In Noosa alone Resort Corp’s $210 million Quay West development, the $300 million Viridian Resort and Spa and the staged Settler’s Cove precincts are employing upward of 700 tradesmen on any given day.

All are reporting strong sales despite tightening markets with individual apartments priced from $1.45 million to $4.5 million already sold to local, interstate and international buyers.

Further south Reed Property Group’s competitively priced Emporio precinct in Sunshine Cove at Maroochydore has recorded $9 million worth of sales in the four weeks since the project’s release and the company is on track to lodge with Sunshine Coast Council before Christmas plans for its massive Big Top redevelopment. Hutchinson Builders is bussing in some 240 workers to the Resort Corp project on the river from the nearby Noosa Australian Football grounds which have become a car park serviced each morning by food and coffee vans. Workers are on site six days a week.

And across the globe a sales campaign in 16 countries is reaping dividends with six Lagoon apartments recently sold to United States expatriates working in Hong Kong.

Developed by Resort Corp as Noosa Sanctuary and branded Quay West by Mirvac Hotels and Resorts since its purchase of management rights in June, it will when finished include 108, one, two and three bedroom Lagoon apartment, 25 Precinct villas and 16 Enclave homes.

“We are building the project out 100 per cent,” Resort Corp marketing manager Graham Staerk said yesterday.

“This is not like some other developments which are staged and released predicated on pre sales. We are building it from go to whoa and plan to open next September.”

The project, which includes a central activities centre with gymnasium, restaurant, bar, 200 seat conference centre, day spa and kids’ club, is already 65 per cent complete.

There will also be tennis courts with an adjacent marquee that can be booked out for functions and a massive heated wet edged and sandy beach lagoon pool.

“We’ve had huge interest in the development in the past two months,” Mr Staerk said.

“That’s been driven by Mirvac giving it its five star Quay West brand and the opening of a Lagoon display unit.

It is the first time Mirvac has applied its five star Quay West brand to a non Mirvac developed project.

Agents from across Australia have been through the display and Mirvac’s 100 strong full rime sales team have been selling it across the world.

Bookings are already being made for the conference centre.

Mr Staerk said most of the one bedroom apartments had already been sold not withstanding the difficult economic environment.

That was a testament, he said, to the strength of the Noosa brand and the strength of the Queensland economy.

The plunging Australian dollar was also making Australian investment property more attractive internationally.

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Which suburbs have the most properties on the market?

October 24, 2008

This week’s Property Pulse looks at which suburbs have recorded the greatest number of property listings over the last months and tries to determine why.

For months now RP Data’s Property Pulse has been highlighting the fact that total advertised listings have been climbing nationwide, this week we look at the ten suburbs in Queensland that are recording the highest number of properties being advertised for sale during the last month.

Across Qld, only one suburb with the greatest number of properties being advertised for sale was found in Brisbane, Forest Lake, which is a recently developed suburb.

However, seven of the ten are located in South-East Queensland with four located on the Gold Coast and two on the Sunshine Coast. With Surfers Paradise, Southport and Labrador making the list it is unsurprising to see that these suburbs have a significant number of units listed for sale.

Meanwhile in newly developed areas of South-East Qld such as Buderim, Forest Lake and Upper Coomera, it isn’t a surprise to see a significant number of houses listed for sale.

Virtually all of the Qld suburbs detailed have recorded growth in median prices during the last 12 months, only Surfers Paradise units and Noosaville houses have seen a decline.

 

 

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Solar rebates go sky high

October 24, 2008

The national solar-panel rebate for Australian homes is so popular that the Federal Government has handed out $150 million - the equivalent of three years’ funding - in 16 months.

Only four months into this financial year, the bucket of money put aside to subsidise solar panels is empty. However, Federal Environment Minister Peter Garrett said the Government would continue to fund the initiative out of next year’s budget.

High demand has meant that approval for rebates takes two months as bureaucrats in the Environment Department find themselves swamped by applications.

Householders can claim rebates of up to $8000 to install solar panels. But the solar industry is claiming millions of dollars in investment are at risk because the future of solar rebates and alternative methods of subsidising solar panels are unclear.

The industry is pushing the Government to scrap the rebate in favour of a feed-in tariff based on the generous German model. A feed-in tariff is a payment people receive for the electricity generated by their solar panels.

The solar industry no longer prefers a rebate because it is a measure that is subject to government whim and will become increasingly unnecessary as the upfront price of panels starts to fall, which is expected in the next two years.

The Clean Energy Council, speaking on behalf of the solar industry, said a feed-in tariff would provide a locked-in return for purchasers of solar panels and better underpin the industry. The Government is looking at a national feed-in tariff but already the states are moving on different models.

No progress was made on the issue at a recent meeting of State and Federal governments.

“We are a company that is growing around the country,” Richard Turner, chief executive of Zen Home Energy Systems, said.

“We have $60 million of investment subject to some sort of rebate or tariff. We can’t understand why the Government has not come up with some sort of announcement about the next step.

“Are they prepared to let the solar industry in Australia collapse?”

Shadow minister for climate change Greg Hunt said the Government had stalled on its promise of a national feed-in tariff and should guarantee that the rebate scheme will not be abolished.

“The Government’s solar policy is in disarray and the industry had been left in financial limbo,” he said.

But Mr Garrett said the popularity of the solar rebate had proven wrong Mr Hunt’s claim that a means-tested rebate would kill the solar industry.

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This is Australia-not the USA

October 20, 2008

This week looks at what has happened to the US property market and analyses why the events in the US property market is so far removed from the Australian market.

Many people subscribe to the fact that what happens in the USA affects all of us (which it does) and if property prices slump there the same must happen in Australia. This however, is not the case!

Firstly the financial systems of the two countries are vastly different and the pitfalls of the US financial system have been uncovered in recent months. The USA’s lending system includes non-recourse loans where if property owners default on their mortgage, the banks will take the property as security and not chase the value of further outstanding debts. By contrast, the Australian financial system has recourse lending where the bank will repossess the house and they will also chase borrowers for the outstanding balance of the debt should the sale of the property not cover their cost of debt.

Secondly, the US market has had a much greater occurrence of sub-prime lending. This is where banks lock borrowers into a home loan at an initial low rate say 2% and after a set period this rate gets increased, usually to above the standard interest rate. The people borrowing in this way can be generalised as being a higher risk: generally those with nil or low incomes and essentially, they have little chance of fulfilling the repayment once the interest rate is lifted.  In Australia, there are laws which prevent this kind of lending and the fact that the country has recourse loans mean that people are more wary of these types of arrangements as most borrowers realise that if they can’t afford the repayments they may lose much more than just their property.

Across the USA, dwelling values peaked during June 2006 at a median value of $226,290 and between Jun-06 and Jul-08 they have fallen by 21.1%. During the first seven months of 2008, median values have seen a fall of 11.1%. It’s not just the falls witnessed across median values, but sales volumes have also taken a significant dive. Volumes peaked during Aug-04 at 111,099 sales, since that time sales volumes have recorded a decline of almost 54%.

In Australia, dwelling values have peaked much more recently at $469,258 during Feb-08. Over the year to August, dwelling values have seen a decline of just 1.3%. Sales volumes across Australia have also fallen through 2008 however, volumes peaked much earlier in Australia than they did in the USA. Australia’s peak sales volumes occurred during May-01 when 35,758 dwelling sales occurred, since that time volumes have fallen by almost 62%.

Importantly, even after Australia reached its peak volume of sales, value growth continued for another six and a half years. Once the USA reached its peak, it took less than two years for property values to start falling.

Fundamentally, ongoing value growth in Australia’s property market is driven by a shortage of supply, this is best highlighted by residential rental vacancy rates. On a quarterly basis, across the last 10 years, the USA has had an average residential vacancy rate of 9.1%. Over this same period Sydney has recorded an average vacancy rate of 2.7%, Melbourne has had 3.0% and Brisbane has recorded an average of 2.8%. Importantly, as at the end of June the USA’s rental vacancy rate sat at 10% whilst Sydney’s was 1.1%, Melbourne’s was 1.0% and Brisbane’s was 2.2%. Interestingly, the US Census Bureau also publishes homeowner vacancy rates, with these currently sitting at 2.8%. In this instance current US homeowner vacancy rates are greater than rental vacancy rates of all Australian capital cities except Perth where they are equivalent.

At the same time as US rental vacancy rates and homeowner vacancy rates have been so substantial, the country has continued to build. Census Bureau figures show that between June 2002 and June 2007, the USA commenced work on 9.268 million dwellings, whilst at the same time the population grew by 13.7 million. The current average US household size is 2.6 persons, highlighting the dramatic oversupply of housing, in contrast, Australia is estimated to be building around 50,000 too few dwellings.

With a rental vacancy rate at around 10% and a homeowner vacancy rate above Australian rental vacancy rates, it’s easy to see why significant property value falls have been recorded. Such a glut of property being built over the last five years coupled with the fact that vacancy rates were already exceptionally high have led to a significant oversupply.

This oversupply, coupled with a poorly regulated financial system has led to the downfall of the USA property market. The Australian market is undersupplied with population growth the highest on record and dwelling commencements remaining flat as well as having minimal rental vacancies. Australia is also recognised as having one of the world’s best banking systems designed specifically to ensure that what happened in the USA does not happen in Australia.

 

 

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Rates news interests Coast builders

October 17, 2008

Sunshine Coast builders have been buoyed by predictions that interest rates could drop to their lowest levels since the aftermath of the 2001 terror attacks.

One Sydney academic is even forecasting an unprecedented zero interest rate by 2010 on the premise that debt-laden consumers will close their wallets and threaten to push the economy into a deep economic contraction.

Macquarie Group interest rate strategist Rory Robertson said the Reserve Bank of Australia (RBA) would cut the cash rate, now at 6% to 4.25% over the next year as global financial market turmoil put the economy under pressure.

Debt futures markets are expecting two bigger than usual interest rate cuts by Christmas.

They expect the RBA to cut interest rates by 75 basis points in November and follow up with another three-quarter of a percentage point move in December.

Such cuts would take the cash rate to 5.25% in November and 4.5% by Christmas, a level not seen since mid 2002.

Master Builders Sunshine Coast regional manager Stephen Robinson said significant rate cuts would be welcome by Coast builders who were beginning to feel the pinch of a slowdown in the past three months.

He said a 0.75% cut next month would provide a stimulus on top of the increase in the first home buyers grant to $21,000.

Master Builders will hold a breakfast meeting this morning at Maroochydore where members will be given an update on the economy.

Mr Robinson said there had been a dip in building inquiries on the Coast which would translate to a slowdown next year.

“Most of the experienced builders have factored in a bit of a downturn… they did that about six months ago.’’

“They are pretty well okay (with work) until March to June but their forward bookings are a little light on.’’

University of Western Sydney associate professor of economics and finance Steve Keen is radically bullish on interest rates, predicting a 2% cash rate by the end of 2009, dropping to 0% in 2010.

Dr Keen said the RBA would become more concerned about high household debt levels than inflation, as deep rate cuts in 2009 failed to stimulate the economy.

“They (the RBA) can cut the pain but they can’t boost the economy.”

Earlier this month, the RBA cut interest rates by 100 basis points for the first time since May 1992.

The RBA cut rates by 1% on five occasions during 1991 and 1992.

 

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Caloundra rents soar to Noosa level

October 15, 2008

Sharp rental fee increases in Caloundra over the past 12 months have put the southern seaside town on a par with Noosa as the most expensive place to rent on the Sunshine Coast.

The Residential Tenancy Authority’s most recent median rental price figures have shown significant jumps in almost all styles of accommodation across Queensland, leading housing minister Robert Schwarten to declare the private rental market in crisis.

Ipswich, Mount Isa, Kingaroy and Townsville took some of the hardest hits in terms of single category price hikes but on the Coast the biggest rises were seen around Caloundra.

Across the Coast the median price for a one-bedroom flat rose from $200 a week to $230 a week but in Caloundra it went almost three times higher, from $200 to $286.

Coast-wide, the median cost of a two-bedroom house went up from $260 to $290 but a larger than expected increase saw prices skyrocket from $250 to $300 in Caloundra to make it the most expensive.

Noosa was still the most expensive place to rent a two-bedroom flat or a four-bedroom house, but although it still topped the price category for three-bedroom flats the weekly rent on one in Noosa actually decreased from $380 to $360.

The only category in which Maroochydore aligned itself with its northern and southern neighbours was for a two-bedroom townhouse, with all three localities seeing a uniform rise from $255 to $300 between September, 2007, and September, 2008.

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Rudd’s $10.4bn rescue package

October 14, 2008

Pensioners, first-home buyers and families will benefit from the Rudd Government’s $10.4 billion package announced today in a bid to strengthen the Australian economy in the face of the global financial crisis.

The government said the Australian economy was strong, but the country was not immune from “the worst global financial crisis since the Great Depression”.

Kevin Rudd’s $10.4 billion Economic Security Strategy contains five key measures:

* $4.8 billion for an immediate down-payment on long-term pension reform.

* $3.9 billion in support payments for low and middle-income families.

* $1.5 billion investment to help first-home buyers purchase a home.

* $187 million to create 56,000 new training places in 2008-09.

* Acceleration of the implementation of the government’s three nation building funds. Investment in nation building projects will also be brought forward to 2009.

Australia’s four million pensioners, carers and seniors will benefit from December 8. with single pensioners to receive a lump sum payment of $1400, while pensioner couples will receive $2100.

People receiving the carers allowance will also receive $1000 for each eligible person in their care.

Mr Rudd said it was time for fast, decisive action.

“The global financial crisis has entered into a new, dangerous, and damaging phase,” he told reporters in Canberra.

“That’s why the government has decided to act decisively and early on the question of this economic security strategy for the future. (It’s) decisive action, responsible action, early action, all in Australia’s interests.“

Mr Rudd said the package would support growth in the domestic economy and provide practical support for households.

The government said about 3.9 million Australian children would receive a $1000 one-off benefit from December 8.

Families who receive Family Tax Benefit (A), families with children who receive the Youth Allowance, Abstudy or a benefit from the Veteran Children’s Education scheme will be eligible.

First home buyers will be eligible for grants of up to $21,000, designed to stimulate housing activity. The scheme will be time limited and all contracts entered into by June 30 next year will be eligible for the new assistance.

The payment under the first-home buyers scheme will be doubled from $7000 to $14,000 and first home buyers who buy newly constructed home will receive an extra $14,000, taking their total grant to $21,000.

The government will invest about $1.5 billion in the housing market over 2008/09 and 2009/10 through this initiative.

Mr Rudd said the $10.4 billion strategy would be entirely funded from the budget, and Treasury had advised that the budget would continue to be in surplus after the measures were introduced.

The government will publish a full budget update in the Mid-Year Economic and Fiscal Outlook within a month.

The Prime Minister said it was time to spend part of the federal government’s $21.7 billion budget surplus.

“The purpose of a surplus in the budget is to deal with tough time and tough times are with us,” he said.

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