“There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.”
John F. Kennedy (1917-1963)
The optimistic view of the local property market we expressed in our last article has been backed up by data and comments from experts published throughout last month. Although the last two years has seen a decline in both values and demand, the future looks bright. Unemployment figures are better than expected, interest rates are still historically low and despite dire predictions from so called experts (ie. Professor Steven Keen) the sky has not fallen down and Australia appears to have weathered the GFC relatively well.
As the economy improves, tourism picks up and the resources sector gathers pace, regional markets may start to show a better performance. In cyclical terms, regional markets tend to lag behind the capital cities with demand rippling outwards from the capitals as more buyers seek the relative affordability of regional housing markets.
If that is the case, many of the regional markets around Australia may currently present solid growth opportunities for astute buyers. (Source: RPData April 2010)
On Queensland’s Sunshine Coast, which is the third most populous statistical division in the State after Brisbane and the Gold Coast, house values have increased by just 4.7 per cent per annum over the last five years compared to Brisbane’s annual capital gains of 7.0 per cent. Sunshine Coast values fell by 6.8 percent between March 2008 and May 2009 (peak to trough) and still remain 1.4 per cent below their peak. (Source: RPData April 2010)
In some areas around Australia the number of premium sales remains well below average. These regions are mainly characterised by coastal markets outside the capital cities where conditions remain soft. The number of million dollar plus house and unit sales on The Gold Coast, Sunshine Coast, Tweed Coast and Byron Shire are about 55 per cent lower than what they were in 2007. (Source: RPData April 2010)
For those that can afford the price tag, premium property markets have generally provided stronger capital gains than the broader market place thanks to the inherently tight supply of inner city, coastal and character properties.
Property market experts have indicated that the tourism and holiday home markets have reached the bottom of the cycle and with predicted increases in tourism numbers and ultimately tourism dollars to be spent as the economy recovers, this will lead to an increase in demand for property in ‘tourist centric’ locations such as Rainbow Beach.
As the average Australian realises that the worst of the economic crisis has passed and they inevitably begin to spend again, money will start to flow back into domestic tourism and discretionary purchases such as holiday homes. The Banks appear to have loosened up their lending criteria somewhat with personal and business borrowings marginally easier to get approved now compared to back in mid 2009. Lenders are looking for relatively low-risk investors but at least they are returning calls these days.
Overall, the signs look to be pointing towards an imminent recovery in the local property market. Although recent sales indicate prices are still approximately 10% below the peak of 07/08, demand should increase over the next 12-18 months. We’re not saying there’s a boom on the horizon but we are confident that we’ve seen the bottom of this market cycle.
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