"My problem lies in reconciling my gross habits with my net income."
Errol Flynn
Last month saw a minor resurgence in the local property market with a noticeable increase in general sales enquiries and two properties going ‘under contract’ including one which is a ‘mortgagee in possession’ sale.
Many prospective buyers and investors have been sitting on the sidelines over the past 3-4 years, trying to predict the best time to buy. Often, it is difficult to pick the ‘bottom of the market’ or the exact right time to purchase and the best advice is probably to research the area you are looking to buy in and have a medium to long term strategy of holding the asset.
The current property market in Rainbow Beach has many properties selling for prices similar to those that they would’ve achieved (or in fact, did achieve in some cases) back in 2003/2004. There are in excess of 30 ‘mortgagee in possession’ properties in town at the moment and this situation is likely to maintain downward pressure on values for the time being.
In saying that, when there are clear opportunities to purchase property at well below replacement cost; it makes perfect sense that the long term capital growth for a property will be positive as demand outweighs supply going forward. There is only a limited amount of developable land in Rainbow Beach and this limits the supply of any new stock. Generally speaking, there are many people who are making more money now than they were five years ago. There might be some sectors of the market that are struggling such as retail and manufacturing but the mining and financial/insurance industries appear to be doing just fine and many workers/business owners involved in these industries are buying assets now at reduced prices because they recognise that there are some absolute bargains to be had.
The Reserve Bank (RBA) decided at the beginning of October to cut official interest rates to their lowest in three years in response to a worsening outlook for the global economy and signs of a weakening local labour market. The RBA cut the cash rate by 0.25 percentage points to 3.25 per cent in a move that was welcomed by borrowers. A 25 basis point cut, (if passed along in full by lenders), would reduce the average monthly repayment on a $300,000, 25-year mortgage by about $48.
The RBA’s decision to reduce rates again in October, marked the third cut so far this year and brings the total official reductions to 150 basis points since November 2011, when the RBA first began its current rate cutting cycle. At 3.25 per cent, official rates are the lowest since October 2009, when Australia was first emerging from the initial effects of the global financial crisis. Rates had fallen to the 49-year low of 3 per cent in 2009 when the central bank was grappling with the first impacts of the GFC. (Source: Sydney Morning Herald, 2 Oct 12)
We have compiled some statistics of house sales data (houses only) over the past 15 years which we thought you might find interesting:
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