MELBOURNE could overtake Sydney as the least affordable Australian city to buy a home in if trends showing housing affordability plummeting to near-record lows continue.

A combination of interest rate rises and property price growth has seen housing affordability worsen more in Melbourne than other capital cities over the past year.

The deteriorating situation for first home buyers and young Australians was revealed in the latest Housing Industry Association affordability survey for the June quarter.

The HIA-CBA Housing Affordability Index fell 9.1 per cent over the last three months to be 32 per cent lower compared to the same period last year, showing a worsening situation nationally.

Affordability in regional Victoria fell by 9 per cent. In Melbourne, it dropped by 6.7 per cent, down 39.8 per cent on a year ago.

The index combines interest rates, household incomes, home prices and other factors, such as the removal of the first home buyers’ impetus to determine housing affordability.

It doesn’t give a suburb-by-suburb breakdown of the most or least affordable places in capital cities or regions.

According to property analysts RP Data, the most expensive electorate to buy a home is Wentworth in NSW. It includes Sydney’s wealthiest suburbs: Point Piper, Bellevue Hill, Vaucluse, Double Bay and Dover Heights.

On a more simple measure of affordability, the median house price of the marginal Liberal seat held by Malcolm Turnbull – which needs a swing of 3.9 per cent to change hands – is a staggering $1.65 million.

By contrast, Julia Gillard’s safe Labor seat of Lalor – held by a margin of 15.5 per cent – has a median house price of $300,000 and is the most affordable metropolitan electorate in Australia, RP Data analyst Tim Lawless said.

It includes the suburbs of Laverton, Point Cook, Werribee, Rockbank and Melton.

Neither main political party has released significant policies addressing home affordability or high house prices, despite the federal election being two days away.

"There has been a dire lack of commitment in this federal election campaign to address the substantial hurdles aspiring home owners face," said HIA chief economist Harley Dale.

In Melbourne, affordability dropped year on year by 39.8 per cent. Affordability in Sydney, by contrast, dropped 33.5 per cent. ”If that trend were to persist then you would rapidly be approaching a situation where Melbourne is on a par with Sydney in terms of [least] affordability,” Mr Dale said.

Housing affordability reached a record low in March 2008 when bank interest rates were above 9 per cent. The latest score on the affordability index in Melbourne is one point above the low of 2008.

The largest falls for the June quarter were recorded in Sydney (-9.1 per cent), Regional Victoria (-9.0 per cent), Regional Tasmania (-8.8 per cent) and Adelaide (-8.7 per cent).

Story by Simon Johanson domain.com.au

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Thousands of animals across the country are being abandoned every year because landlords are unwilling to rent homes to people with pets, the RSPCA says.

The RSPCA manages about 160,000 animals Australia-wide each year, and the charity’s ACT chief Michael Linke says shelters are bursting at the seams because changing living situations mean people can no longer stay with their pets.

"It’s unfair someone’s expected to surrender an animal under those circumstances," he said.

"It’s a heartbreaking thing. I’ve sat in the room with people as they’re surrendering their animals; they don’t want to do it but their choices have been limited.

"It’s their only option because of pressure on rental accommodation, and they’ve taken that difficult decision.

"It’s heartbreaking for our staff, but then we’ve got the double whammy because we then need to find a home for that animal."

Mr Linke says pet owners struggle trying to rent private and single-dwelling houses the most.

"We’ve been calling on the Real Estate Institute and private land-holders to loosen the ties a bit and be more forthcoming in allowing people with pets to find accommodation, because we’re finding a lot of people are surrendering animals to move into free-standing houses," he said.

Jacqui Limberger and her partner Ryan Blunden created a software application which helps find pet-friendly rentals on realestate.com and domain.com.

Their website also helps pet owners write a resume for their furry friends, to help give them a better shot of being approved by real estate agents.

"Research has show a lot of landlords and agents may not even consider letting to someone with a pet until they’ve seen its credentials and references from other landlords," Jacqui says.

"It gives applicants another piece of evidence to say ‘My pet’s not a problem, I’m a good tenant and I take responsibility for my pet.’

"It’s about providing people with information and resources, so landlords see pet renting doesn’t have to be a problem and also to help applicants put their best foot forward."

Inner-city kitty?

But there may be some good news for pet lovers.

The RSPCA’s Mr Linke says that these days, there’s more chance of then being approved to rent units and apartments, and a new study has found you don’t necessarily need a big back yard to own a dog or cat.

Susie Willis from the Petcare Information and Advisory Service (PIAS) says a recent study of 800 people found pets and owners who live in units are just as happy as those who have backyards.

"There are some breeds of dogs that really fit indoor living – like pugs, whippets, french bulldogs – that don’t actually like it too hot or too cold, so being indoors is ideal for them," she said.

"Toilet training is obviously important but the reality is, most healthy adult dogs can be quite happy with two or three toilet breaks a day."

She says there’s no reason for people who live in a small inner-city place to not have a pet, and the PIAS has put out a ‘how to’ guide to help people out.

"We’ve got tips on how to prevent people from becoming bored, exercise, how to create a pet-friendly environment," she said.

"The whole point is, you can keep dogs without a backyard, but you do have to be careful with the way you manage the situation.

"We go through things from what to think about when choosing a dog or cat, how to find reliable sources to get them, what to think about when deciding on different breeds, and then we look at common problems and give tips and advice on how to solve issues.

"We also look at rental situations because it can be difficult to own pets in that situations.

"One of the things we’re conscious of doing is trying to make sure that people don’t get the wrong sort of pet and they don’t get a pet if they can’t give the necessary commitment to its ongoing care."

Story By Cassie White – ABC News

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The level of household debt in Australia has risen over the past three decades from less than 50 per cent of household disposable income to about 150 per cent.

Ric Battellino, the Reserve Bank of Australia deputy governor, has sought to allay concerns that this indebtedness means we face a risky unsustainable outlook. He said that 75 per cent of household debt was held by the upper 40 per cent of income-earners.

The bank’s governor, Glenn Stevens, had earlier given the RBA’s estimate of Australia’s dwelling price-to-income ratio, which found that dwelling prices in capital cities were typically 4.8 times disposable household incomes – about half the ratio put by the doomsaying international survey Demographia.

The Commonwealth Bank chief executive, Ralph Norris, was asked after the bank announced a $6 billion profit last week whether the housing doomsayers were nuts.

”I wouldn’t go as far as to say they’re nuts but I think that it’s very easy to make assertions based on averages,” he said. ”You come to a different view when you look at the fact that the incomes based around averages are not relevant to the average person that has a mortgage.

”So you know, we’re in a situation here where, in my view, the housing market in Australia is healthy.

”There will obviously be variations in price and we shouldn’t be surprised if there are, you know, drops of 5 per cent or 10 per cent, as there are obviously increases in value.

”But I think the range of value is not going to be anything that suggests a bubble and a collapse of the housing market in Australia.”

Deutsche Bank issued a research paper last week suggesting Australia’s house prices were not as vulnerable as doomsayers argue.

While acknowledging that on many comparisons Australia had a high house price-to-income ratio and high levels of household debt, the Deutsche Bank economists Phil O’Donaghoe and Adam Boyton argued the vulnerability of Australian housing was ”overblown”.

”The housing market is perhaps the most common vulnerability we are asked about in the Australian economy,” the said.

”Combined with the role played by the US housing market in the financial crisis, investor awareness and suspicion of this key asset class is perhaps understandable.

”But we have long held the view that a broader assessment of the Australian housing market offers a more sanguine conclusion.”

The Deutsche Bank report noted that mortgage debt obligations in Australia were fully recourse loans and borrowers’ mortgage obligations extend beyond the mortgaged property, therefore providing a greater incentive for repayment relative to the United States.

Battellino suggests the strongest evidence on the sustainability of household debt was the low level of arrears. This was evident again this week in housing repossession data.

Repossession actions lodged in the NSW Supreme Court for the first six months of 2010 totalled 1198.

There were 3800 last year and 4000 during 2008. The peak year was 5300 in 2006.

Foreclosures in the US rose 4 per cent from June to July, exceeding 300,000 for the 17th month in a row, according to RealtyTrac.

The number of foreclosure activities, which incorporates all phases of foreclosure including default notices, scheduled auctions and bank repossessions, totalled 325,229 in July.

Lenders seized 92,858 properties last month, the second highest monthly total since RealtyTrac began tracking repossessions in 2005. Total foreclosure activities reached 1.65 million in the first six months of 2010.

Deutsche Bank noted that Australian house price concerns were ebbing. ”The pulse in housing finance has moderated in line with rises in the cash rate. The housing cycle points to a steady moderation in price pressures.

”Elements of the market which had been described by the RBA earlier this year as demonstrating elements of ‘considerable buoyancy’ have moderated. Auction clearance rates have also slowed.” From a peak of 72 per cent at the end of last year, auction clearance rates had fallen by last month to 61 per cent, Deutsche said.

Story by Jonathan Chancellor www.domain.com.au

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In fact, both the national figure and the NSW numbers are at nine-year lows. Included in this data release is the proportion of loans to first home buyers. In NSW, this proportion seems to have bottomed out, bubbling along just above the low of 16 per cent seen in March.

House prices for the June quarter continued growing but at a slowing rate. This was a good result for existing home owners. Some of this strength was due to investors continuing their return to the market, as evidenced by the increase in investor finance in the past 12 months, filling the gap left by exiting first home buyers and other owner-occupiers.

However, this trend reversed in the June numbers, with the value of loans to investors falling significantly for the first time in nearly a year. So, while auction clearance rates and first home buyer numbers seem to have stabilised, it’s very likely the drop in demand for loans for owner-occupied and investor housing will translate into flat or falling prices across Sydney during the spring season.

Indeed, a closer look into June-quarter house prices showed that in the month of June, prices did fall slightly across Sydney as a whole. Of course, a pause in growth or some orderly declines in prices is good news for aspiring owners and probably necessary to encourage first home buyers back.

Matthew Bell is the economist for the Fairfax-owned Australian Property Monitors.

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  Historically, houses have enjoyed a much more rapid appreciation in value than the growth recorded by units. There are a number of reasons for this more rapid level of growth: greater demand for houses, diminishing availability of development land, higher quality of stock and design available for houses rather than units and the greater Australian dream to own a house rather than a unit, among a number of other reasons.

Despite these factors, over the last five years units have recorded average annual value growth of 7.4% compared to 7.1% for houses. However, the results suggest that the superior performance of units compared to houses is quite a new phenomenon as over the last 10 years the average annual value growth of houses (9.9%) has well and truly outperformed units (8.0%).

The improvement in the capital growth performance of units in recent times is most likely due to affordability issues. Based on current capital city median prices, unit prices are recorded at $420,000 compared to houses at $495,000. Accordingly, units offer a much more affordable alternative housing option than houses.

Many unit developments, particularly newer units, are also in strategic locations and are where a large proportion of the market aspires to live but cannot afford to buy a detached home. In many cases, apartments provide a viable and relatively affordable option to buy into these markets. A good example of this is Bellevue Hill in Sydney. Bellevue Hill is one of the country’s most expensive housing markets with a median house price of $3.85 million, unit prices in the suburb are recorded at $620,000, -84% more affordable than a house.

The inner city and well established residential areas enjoy high demand for units because in most instances they are: well catered to by local amenity including shops and restaurants, well located close to working nodes and are serviced by existing public transport amenity which is often not available in outer suburbs of the capital cities.

Over the 12 months to June 2010, unit values have increased by 11.4% compared to growth of 10.2% for houses. On a month-to-month basis, annual value growth for units has been outstripping that of houses fairly consistently since April 2008.

Throughout the individual capital city markets, the growth in the value of units has outperformed houses within Sydney, Brisbane, Perth and Darwin over the last 12 months.

Throughout the capital city markets Hobart has the most affordable units with a median price of $254,250 and Sydney the most expensive with a median of $450,000.

When the differential between median house prices and unit prices is analysed you gain a greater insight into the performance of the market.

Darwin has the greatest differential between house and unit prices at $142,176 and the smallest differential is recorded in Adelaide ($67,252). Sydney, Brisbane and Darwin each recorded a differential in median price of at least $90,000 and these three cities each recorded a greater level of annual value growth for units rather than houses over the last 12 months. Perth also recorded a superior performance for units over the last year however, the price differential in that city is $75,000.

Although the popularity of units is increasing, since the onset of the Global Financial Crisis (GFC) many developers have found it much more difficult to obtain finance for higher density developments. This is due to the fact that the banks are becoming more risk adverse and the fact that a number of high profile higher density projects have either been cancelled or delayed. The latest building approvals data showed that over the year to June 2010 the number of approvals for private sector units has rebounded very strongly (57.7%) however, the monthly volume of approvals is still well below levels consistently recorded prior to the onset of the GFC, highlighting that finance for higher density product is difficult to obtain.

It’s undoubted that units have significant appeal for price sensitive purchasers due to the fact they can own in a popular location at a far lesser price compared with a detached home. For investors, units are appealing because in most instances the rental yields are much higher than they are for houses. Across the capital cities, the average gross rental yield for a unit is currently recorded at 4.8% and for houses yields are recorded at 4.0%. The superior rental return achieved by units can be attributed to the fact that units are typically located in areas that have high demand: close to major transport networks, employment nodes or retail centres.

Tim Lawless is the Director of Property Research at RP Data.

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The days of only looking for a property through the paper have changed, with the majority of people these days starting their search online and loving the flexibility of being able to set up alerts and notifications so they get told when a property that meets their search criteria becomes available in the marketplace.

Purchasers can first narrow down the number of potential properties they’re interested in through use of criteria such as: location, price, property type, number of bedrooms, number of bathrooms, land size, car parking, etc.

They’ll then look at the results that have been returned by the search engine they’re using and narrow it down further. They’ll do so according to the first impression they get from the photo, heading or first sentence. They’ll only open some of the listings to actually read the description in full and see all the photos.

So my question is this… If you’re going to put in parking into your investment property, which is going to give the best returns? Does having a garage add more value then a carport? And what about a shade sail? Or just a driveway with an uncovered parking space? Are potential buyers or tenants even going to care too much about what type of parking it is, as long as it has some?

The majority will argue that a garage will bring in the highest returns (how much it adds to the value of the property compared to how much it costs to put in), especially if the garage is needed for more reasons than just parking the car.

It’s often perceived as a space with multiple uses. There’s the potential to use the garage as an additional storage space or as a handyman’s workroom. It also provides additional security for the occupier’s vehicles and other belongings.

For some people it can also be an additional living space, like a rumpus room where they might have a pool table, bar, etc.

On the other hand building a garage also costs the most and involves getting plans approved by the council which can introduce additional delays for the project. All in all a new double garage costs somewhere around $40,000 these days inclusive of all costs. And it tends to add somewhere between $50,000 and $70,000 to the bottom line of a property investing deal, depending on the location of the home.

So is it really worth it? If you have that much extra in the budget for your renovation, then it probably is. But not everyone does.

A carport does cost less to construct and still provides undercover parking for cars, however it also requires getting a permit from the council which may cause delays and introduce additional costs. So what does that leave us with?

The shade sail. In some councils having a cover which isn’t 100 per cent solid which is under three metres in height may not require council approval. They still protect your vehicle from UV rays and the higher quality ones can be fairly weather resilient.

They can also look very modern in appearance and are quite often used in new developments and display homes. You can get them for around $1500 to $3400 (3m x 6m) including poles and fittings. Surprisingly they tend to increase the bottom line of a renovation deal more than a standard carport. They tend to increase the value of the home by about $5000 to $15,000.

Interestingly having uncovered parking doesn’t add as much value to the renovation deal as you’d think. Although most people would be happy that a property has some parking they won’t value it as much as any of the other options.

There are exceptions as always and central business districts of most big cities fall into that category where any parking at all is considered a blessing.

Ana Stankovic is well known as one of Australia’s leading renovating-for-profit specialists and is regularly featured in prominent industry publications, expos and continually educates investors.

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The extraordinary growth in house prices in Australia’s capital cities over the past year has resulted in the value of an average home in Melbourne rising by nearly $98,000.

In Sydney, the price increase for an average home peaked even higher, above $104,000.

House price figures for eight capital cities released by the Australian Bureau of Statistics yesterday show year-on-year growth from June 2009 of 24.3 per cent in Melbourne and 21.4 per cent in Sydney.

A 24.3 per cent rise above the median Melbourne house price of $403,000 for June 2009 equates to an annual increase of $97,929. Similarly, a 21.4 per cent rise above Sydney’s median 2009 June price of $490,000 equates to $104,860.

The figures provide welcome news for first home buyers, indicating the growth in property prices has peaked and is now declining.

Melbourne prices grew by 3.6 per cent over the June quarter compared with growth in the March quarter of 6.7 per cent.

Economists suggest property prices are likely to flatten, rather than decline significantly, and then remain stable.

”It’s still pretty incredible growth, given we have had six cash rate increases,” Nomura Australia economist Stephen Roberts said. ”That tends to rule out any relief from lower interest rates, too, for some time. The last thing this housing market needs is any stimulus from lower rates.”

Economist Saul Eslake from Melbourne’s Grattan Institute said the ABS figures confirmed data released last Friday that showed property prices declining in June. ”It’s consistent with all the other evidence of lower clearance rates and lower volumes,” he said. ”A lot of the heat that was in the market when interest rates were lower and when there was more government support in the form of grants has now dissipated.”

Overall, Australia’s house price growth slowed less than expected in the June quarter. Economists were predicting growth of 2 per cent but capital city house prices rose 3.1 per cent, following a revised 4.2 per cent rise in the March quarter, according to the ABS.

Economists suggest demand may continue to keep prices stable, with 200,000 new homes needed to house Australia’s growing population.

This comes despite dwelling approvals posting a surprise 3.3 per cent fall in June and the volume of new home sales also declining.

Brisbane recorded the slowest property growth rate with an 8.5 per cent increase. Canberra prices rose 19.6 per cent, Darwin 14.6 per cent, Adelaide 11.6 per cent and Hobart 10.8 per cent, the ABS data shows.

The combination of growth in house prices, a strong labour market, the push for wage increases and other inflationary factors was likely to add to the case for the Reserve Bank lifting interest rates towards the end of the year, Mr Roberts said.

House prices were also affecting other parts of the economy. Households forced to pay off large mortgages were ”scrimping and saving”, which was affecting other sectors such as retail sales, he said.

Story by Simon Johanson www.domain.com.au

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EIGHT out of ten Australians are worried about a lack of infrastructure and affordable housing given the growing and ageing population, new research shows.

The nationwide polling, carried out by Galaxy, found more than 90 per cent of Australians believed both federal and state governments needed to do more as the country’s population over 65 doubles and the number of taxpayers to support them halves.

Commissioned by The Benevolent Society, the research found the vast majority of people backed calls for a high allocation of low cost or subsidised housing.

"What struck us the most about the research results is the high level of concern across all age groups – from 18-year-olds to over 50-year-olds," said Richard Spencer, CEO of The Benevolent Society.

"It’s surprising that 90 per cent of respondents expressed concern about Australia meeting the costs associated with our ageing population, and even more in each age group agreed on the need to create more affordable housing."

The findings supported recent studies showing elderly renters on low incomes were one of the most vulnerable groups in the housing market, said Professor Peter Phibbs, from the University of Western Sydney.

"All tiers of government need to do more to provide better housing opportunities for older Australian renters," he said in a statement on Tuesday.

"State governments can use their land use planning systems to encourage the sorts of affordable housing outcomes that would be suitable for this group."

Mr Spencer said older Australians often resisted moving into nursing homes.

"They want more choices for late old age than the current options of staying in unsuitable houses where they risk accidents, institutionalised nursing home care, or distant retirement villages where they are cut-off from family, friends and established support networks," he said.

The poll showed Australians believed the main consequences of the growing population were a lack of infrastructure (81 per cent), a lack of affordable accommodation for low income earners (80 per cent) and overcrowding in cities (75 per cent).

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"Out of control" property taxes are killing the home ownership dream, according to the Real Estate Institute of New South Wales (REINSW).

Declaring property taxes a "critical election issue", the institute has called on Prime Minister Julia Gillard and Opposition Leader Tony Abbott to detail how each will reform unfair tax regimes.

"Australian governments are driving up cost of living pressures and keeping thousands of Australians out of home ownership," says REINSW chief executive officer Tim McKibbin.

"The REINSW has launched its ‘Real Tax Policy’ in the middle of the Federal Election campaign calling for landmark reform of property taxes across Australia.

"In the context of a weakening global economy, it’s vital that whoever wins the election urgently reforms property taxation at a Commonwealth and State level."

The REINSW’s tax policy suggestions include the prohibition of stamp duty on GST, the reduction of transfer duty rates and land tax rates and the retention of negative gearing for property investments.

Story from Australian Property Investor

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Residential property prices in major Australian cities have increased by almost 20% in the last 12 months, according to the latest figures to be released.  
The data from the Australian Bureau of Statistics shows average quarterly growth to June of 3.1% and an annual increase of 18.4%.

The data shows growth of almost double that of the private sector RP Data/Rismark index released last week which showed national city dwelling values up 10.5% in the same period.
In Melbourne house prices increased more than 24% in the last year while in Sydney they rose 21%, according to the ABC figures.

Canberra saw a 19.6% price increase, Darwin 14.6%, Perth 13%, Adelaide 11.l6%, Hobart 10.8% and Brisbane 8.5%.

The data reveals that the rate of growth in capital cities peaked at 5.5% in the December quarter last year, after rising from negative territory during the economic downturn, and is now steadily falling.

In the second quarter of the year prices increases slowed considerably. In Sydney they increased by 4.9%, by 3.6% in Melbourne and by 3.2% in Adelaide.  Darwin saw a 2.8% increase, Canberra was up 2.1%, Perth 0.4%, Brisbane 0.3% and Hobart 0.1%.

Last week’s RP Data index showed average house prices had fallen slightly after 17 months of consecutive gains, as economists agreed the market was at a turning point. In a note ANZ economists said while growth was expected to slow further this year, prices would be supported by the underlying housing shortage and a buoyant outlook for the Australian economy.

It comes as analysts warn that Australia is facing a housing crisis and that the national shortfall of 190,000 dwellings will widen to 466,000 by 2020, amid expectations of a rapidly growing population.

Developers claim that a shortage of land and a lengthy planning process is hampering construction. HIA chief economist Harvey Dale said it takes an average of seven to eight years for a greenfield site to reach completion, an unnecessarily long period that pushes up costs and reduces supply.

‘At the end of the day, the lack of adequate, affordable land supply is at the heart of the problem. The number of processes a development must go through is higher now than was the case 10 years ago. We are regressing rather than progressing in terms of the bureaucracy involved in building a new home,’ he said.

Story source www.propertywire.com

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