SYDNEY and Melbourne house prices have gone through the roof over the past year.

Adelaide and Darwin lead other capital cities in recording strong growth in the real estate market.

But analysts warn that the rate of growth is slowing rapidly across the nation and could flatline by year’s end.

Preliminary estimates from the Australian Bureau of Statistics show the average price of established housing in the eight capital cities rose an average 3.1 per cent in the March quarter.

Sydney and Melbourne led the way with sharp rises of 4.9 per cent and 3.6 per cent respectively. It was the fifth consecutive rise in the eight capital cities index.

For the full year to June, overall average house prices rose 18.4 per cent, and the ABS said the average price rise of 21.4 per cent in Sydney was the largest rise since it began recording these figures in 2002.

Adelaide and Darwin recorded quarterly growth rates of 3.2 per cent and 2.8 per cent respectively, Perth 0.4 per cent and Brisbane just 0.3 per cent.

But the data also revealed the rate of growth in capital cities peaked at 5.5 per cent in the December quarter last year, after rising from negative territory during the economic downturn, and was now steadily falling.

Senior Westpac economist Matthew Hassan said a clear pattern of moderation across all measures had emerged over the past six months. "There are clearer and clearer signs that price momentum has softened quite significantly over the first half of this year," Mr Hassan said. "The auction clearance rates tell it; the finance approvals tell it; the sentiment is pretty clear as well."

He said the incremental impact of interest rates returning to normal levels had squeezed affordability and slowed demand as the market tilted in favour of buyers.

"It doesn’t necessarily mean we’re rushing headlong into price declines," he said. "I think with rates still around neutral and clearly quite a lot of pent-up demand for housing in many markets, . . . you’ve got a pretty good case for a soft landing."

But RP Data national research director Tim Lawless was less optimistic, pointing out the ABS data had not picked up a deterioration in June.

The RP Data-Rismark home index shows home values fell 0.7 per cent in June. Mr Lawless said that was accompanied by clearance rates of 55 to 60 per cent, down from 70 per cent rates late last year. Housing finance approvals also remained low.

"The next six months is likely to see flat market conditions at best, perhaps further month to month modest declines," he said.

Story by Nicolas Perpitch The Australian

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It can be desperate times if you are looking to rent something. Especially when vacancy rates are dipping under 2 per cent in some areas, such as Melbourne’s inner city and its outer reaches.

Even if you’re not too fussy, tight rental vacancy rates in many cities means the situation can be dire. So it’s not surprising that when we asked our readers what they had done to secure a rental property, more than one-quarter said they had offered more than the asking price, taking a punt that a landlord couldn’t resist some extra income.

It seems if people find a house or an apartment they like, they are often pulling out all the stops to secure it. Other survey respondents told us they had payed the rent and bond on the day, completed their application before the open for inspection because it showed they were keen and ready to go, or buttered up the leasing agent, believing it never hurts to be friendly.

Personally, the most ridiculous thing I’ve had to do is provide pet references for our two small dogs who aren’t large enough to chew the big toe off the postman. My two ankle biters are another matter – but no references requested for them. Yet.

Looking around Australia, there’s bound to be a vast chasm in how easy some tenants will be having it in their hunt for a home. As the below figures show, it’s likely to be difficult in Melbourne, Sydney, Canberra and Adelaide, but a whole lot easier in Brisbane and Perth. But if mining returns to its previous highs, that could change too.

There’s also news that investors are making a comeback to some parts of the market – for example in Sydney in the city’s west and south west. That could help to ease the situation for some tenants by providing more rental properties. The other good news is first home buyers are expected to begin buying again soon, potentially freeing up some rental homes as well.

Vacancy rates around the country

Canberra; About 1 per cent, as of April, 2010

Adelaide; 1.03 per cent for the month of May.

Wollongong; 1.1 per cent in May. Up 0.2 per cent from the previous month.

Sydney; Overall 1.2 per cent in May, a fall of 0.1 per cent from the previous month.

Melbourne; Overall 1.5 per cent in May. Within 4kms of the CBD, 0.9 per cent in June, down from 1.6 per cent in May. Outer suburbs 0.8 per cent.

Newcastle; 1.6 per cent in May, a fall of 0.3 per cent from the previous month.

Darwin; 2.5 per cent, as of April.

Brisbane; 3.9 per cent in the three months to the end of June. Within 5kms of the CBD 2.6 per cent. Remainder of Brisbane 4.6 per cent.

Perth; 4.1 per cent in the three months to the end of March. This is a significant turnaround from March 2007 when the Perth vacancy rate plunged to just 0.8 per cent.

Carolyn Boyd is a property journalist and keen follower of Australia’s housing market.

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A private gauge of Australian inflation slowed during July, adding more weight to suggestions the Reserve Bank will keep the official interest rate at 4.5% at tomorrow’s meeting.

The TD Securities-Melbourne Institute revealed today its consumer price inflation gauge rose 0.1% in July, down from June when it rose by just 0.3%. The annual pace of inflation slowed to 2.8%, within the RBA’s 2-3% target band.

The data comes after official figures revealed a slowdown in annual underlying inflation to 2.7%.

"The soft CPI report allows the RBA to remain on hold for several months as mortgage lending rates have already been restored to average levels," Annette Beacher, a senior strategist at TD Securities, said in a statement.

The inflation gauge reveals utilities, health services and alcohol and tobacco prices all rose, but they were offset by declines in food, holiday travel and petrol, which actually dropped by 2%.

Meanwhile, Australian manufacturing activity increased in July with new orders and output both expanding, although employment has declined.

The Australian Industry Group-PriceWaterhouseCoopers performance of manufacturing index rose by 1.5 points to 54.4 during July, above the 50-point level separating expansion from contraction.

Story by Patrick Stafford www.smartcompany.com.au

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LABOR’S push to cut greenhouse gas emissions through the use of energy efficiency schemes was yesterday dealt another blow when building industry heavyweights discredited the star ratings being applied to hundreds of thousands of homes.

Investigations by the building industry have found that the mandatory star ratings scheme is inaccurate and fundamentally flawed.

The Housing Industry Association and Master Builders Australia yesterday joined scientists in calling for urgent action by the Department of Climate Change and Energy Efficiency to resolve problems that are potentially having an impact on more than 100,000 houses built each year.

They said owners were not aware that mandatory software tools — used to calculate whether a planned new house could achieve the minimum five-star energy efficiency rating necessary to obtain approval for construction — gave vastly different results for the same house under identical conditions.

It is another setback for the government while it is still trying to quell criticism after the shelving of its emissions trading scheme, the disintegration of the home insulation program and green loans scheme, and the subsequent findings that both were fatally flawed, costing lives and taxpayers’ money due to poor planning and execution.

It also comes after Labor’s latest environmental announcements — the 150-person citizens assembly to forge a national consensus on action on climate change and the cash-for-clunkers green car replacement scheme — were widely criticised.

Opposition climate change spokesman Greg Hunt said last night that the government could not get its environmental programs right.

"We saw that with pink batts, green loans and cancelled solar programs," Mr Hunt said.

"They need to explain why home owners and builders face this confusing and potentially costly mess.

"They should release all material on this to the public before the election."

Flaws in the star rating system emerged after industry bodies, private companies and scientists commissioned independent studies showing significant variations were being calculated by the three different software tools when tested on identical dwellings.

The results show that the three software tools, including the original model designed by the CSIRO, were inherently unreliable.

The star ratings system was rolled out nationally several years ago and recently extended to older houses.

The findings mean that in some cases houses that should be failing the energy efficiency test are being approved and built, while identical houses are going back to the drawing board for changes and costing their owners more time and money to get right.

It also means the stated objective of the federal government to cut greenhouse gas emissions in houses is in serious question.

Faulty software tools will have a greater impact from next year when the federal government’s national energy strategy requires all homes being sold or leased to be star-rated and for the rating to be disclosed.

Older dwellings, which will not achieve the five- or six-star minimum, may be punished financially by buyers and tenants.

The findings add weight to the concerns of energy efficiency experts that star ratings are a multi-billion-dollar debacle.

Peter Jones, chief economist of Master Builders Australia,

said yesterday: "We have independent expert evidence showing us this is a real concern and it needs to be brought to light and addressed.

"There are unacceptable differences between the star ratings produced by the software tools when assessing the same house.

"We are drawing a line in the sand and saying, ‘Look, the research is overwhelming now; something must be done’, Mr Jones said.

The authorities need to come up with a solution so that consumers can be confident in the star ratings and the tools.

"As builders, we do not really care (what the tool is) but we think it is bad policy when it is not working properly."

Housing Industry Association senior executive director Kristin Tomkins said the association’s independent testing, which showed significant differences in energy ratings, including a variation of 3.2 stars for the same Brisbane house, were troubling and undermined the scheme’s credibility.

She said builders and home owners needed confidence in the mandatory energy efficiency programs that cost them time and money.

Industry sources called for an Australian Competition & Consumer Commission investigation and said some savvy energy assessors were "gaming" the star ratings and making a mockery of the scheme by switching software tools until one delivered the required result.

The Department of Climate Change and Energy Efficiency, which has recently joined the CSIRO in investigating problems with the gauges, has said it was "premature to say there is any significant impact on overall house ratings or compliance costs".

Source: The Australian newspaper

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A new survey confirms high-income property investors have returned to the Australian property market with the intention to buy, a considerable shift from the same time last year. There has been a nine per cent increase in demand by investors looking to buy a property at the upper end of the market, according to the realestate.com.au’s Consumer Insights Report (Buy).

Twenty-five per cent of investors were searching for properties to buy in the $500,000 or more price range, up from 16 per cent in April 2009.

General manager of sales and operations for realestate.com.au Peter Wright says the research findings paint a promising picture of the property market.

“The report revealed one in two property seekers now believe the market is rising – a result not observed for two years,” he says. “Of those who believe the market is rising, the perceived reasons for growth include a seven per cent increase in investors returning to the market (35 per cent), a shortage of properties (54 per cent) and a growing economy (40 per cent).

“Investors were also one of the top three homebuyer groups (39 per cent) that have sought pre-approval for finance with the intention to buy or build. First homebuyers and investors were also more likely to say they had thoroughly researched the market – up by 16 per cent and eight per cent from the last wave respectively,” Wright says.

The report also showed that investors were more likely to be male, aged 50 to 64 and living in high income households, while female investors were more likely to be younger, aged 25 to 34 years (30 per cent), compared to males (21 per cent). Both male and female investors were more inclined to come from double income households (54 and 50 per cent respectively).

The report is an in-depth survey that delves into the psyche of the Australian property buyer, covering topics such as buy, rent and share. The survey ran from May 31 to June 3 with 4082 Australians taking part.

Source: Australian Property Investor

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National city home prices fell for the first time in 18 months in June, as rising interest rates sent auction clearance rates lower.

Median national home prices fell by 0.8 per cent in June, in raw terms, from a 0.6 per cent increase in May, according to RP Data-Rismark figures. It was the largest monthly fall in home prices since April 2008, shaving the median national dwelling price by $3000 for the month to $465,000.
”As mortgage rates have normalised, participants in the housing market have cut their house price growth expectations, which explains the current change in conditions,” Rismark International managing director Christopher Joye said in a statement.

Official interest rates have risen six times since October to 4.5 per cent, lifting the average cost of mortgages by $300 a month. Since February, auction clearance rates – a key reading on the buoyancy of the market – have fallen from 80 per cent to around 60 per cent in Melbourne and Sydney.

While the RP-Data figures point to a retreat in house prices, a survey out yesterday indicated market players anticipate a slowing growth in house price gains in the coming year. Real estate agents, developers and other residential industry tip only 1.4 per cent of price growth over the next year, down from 5.4 per cent growth expected three months earlier, according to the National Australia Bank June quarter property survey.

Sydney and Melbourne
In the three months to June, Australian home values were basically flat, rising 0.1 per cent seasonally adjusted, RP Data-Rismark said.
For the same period, home prices in Sydney rose 0.5 per cent and by 0.2 per cent in Melbourne. Prices in Brisbane fell 1.3 per cent, and by 2.5 per cent in Perth. RP Data doesn’t release June-only figures on city price movements.

Canberra home prices fell 0.8 per cent, while in Darwin they fell 0.1 per cent.
Home prices outside capital cities rose by 0.3 per cent in June, after falling 0.9 per cent in May.
”It’s sobering to remember here that we have had 17 consecutive monthly increases in Australian capital city home values,” said Mr Joye.
”If the sharemarket rose for 17 months straight and then tapered, people would not think twice. It might be wise to apply the same logic to our housing market,” he said.
Despite the slowdown, national city home prices have risen 10.5 per cent over the year to June.

Quarterly drop
Prices fell the most in the June quarter for the top fifth of homes, RP Data-Rismark said.
”It’s likely that the top end has been adversely affected by the volatile share market and the uncertainty swirling around Europe and North America,” said RP Data national research director Tim Lawless.

”RP Data-Rismark’s results for the most expensive 20 per cent of suburbs show a real shift in the market dynamic," said Mr Lawless. "Through most of 2009 and the first quarter of 2010 it was the premium markets that experienced the strongest capital growth."
"In recent months, the middle 60 per cent of suburbs have outperformed," he said.

"Another variable impacting sentiment may be the federal election, with some people placing their purchase or sale plans on hold subject to seeing the full set of policy positions,” he said.
The trend of slowing or falling home prices was picked up in Australian Property Monitors quarterly data, released yesterday, which showed the median national house price rose 2.4 per cent in the June quarter, slowing from a 3.8 per cent rise in the March quarter.

However, Mr Lawless downplayed fears that Australia faced a housing bubble ready to pop.
”As the RBA has independently confirmed, arguments in favour of house price `bubbles’ remain, in my opinion, overstated,” Mr Lawless said.

”If we saw blow-outs in average time on market, re-listings, and vendor discounting, it would set off a few alarm bells," Mr Lawless said. "This, however, is not currently the case.”
The Reserve Bank will hold its monthly board meeting next week, with investors and economists expecting no change, following weaker-than-expected quarterly inflation this week.

Story by Chris Zappone www.smh.com.au

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It’s a question many parents are facing – do kids really need their own rooms? It seems to have become a community norm that even very young children will sleep in separate bedrooms unless parents are "forced" to put them together because their home isn’t big enough and they can’t afford something with more bedrooms.

In fact, families upgrading into bigger homes have underpinned much of the market activity in Australia’s capital cities this year. Having sold off their first or second property to an eager first home buyer during last year’s rush to cash in on the Federal Government’s boosted grant, upgraders hit the leafy suburban streets, looking for something bigger and better to house the kids.

The usual profile is of a family that has one child on the ground with another on the way, or recently landed, that wants to get something a bit bigger where each can have their own bedroom. But maybe someone forgot to ask the kids? It seems, given the choice, many young children would prefer to share a bedroom. I found this out recently when I was pondering how to shrink the extended going-to-bed hours of my three-year-old and one-year-old, who were in their own rooms with their own bedtime routines.

Having them in the one bedroom seemed a sensible answer. And when asked for his opinion, my son’s immediate response was "Yes". So how’s it going? No more extended patting to sleep of the one-year-old who is now happy to lay in her cot and listen as I read to her brother. And my three-year-old isn’t feeling so scared to be left alone in his room, either.

It’s a step that’s freed up a spare room, and really broadened our housing options. Granted, given they are a boy and a girl, there will come a time in a few years when it won’t be appropriate for them to share but for the mean time we think we can easily get away with a three bedroom or even two bedroom house for a few years.

It makes you think, do we really need all the space we think we do? We know Australians build the world’s biggest houses, pipping even the US. Along with media rooms, home gyms and offices, we’ve also been adding extra bedrooms. As previously pointed out by CommSec economist Craig James, about 20 years ago only one in every six homes had four or more bedrooms. By 2006 it was one in every 3.5 homes – which seems a little counterintuitive given family sizes have for a long time been shrinking.

Let’s not be too harsh on parents. Going by the many tortured discussions on internet forums about whether parents should put their children in a shared bedroom, parents are not just blindly assuming their ankle biters need privacy from the time they are a month old. And it might not be just about the number of bedrooms.

One of the factors that families who are fleeing two-bedroom homes or units to bigger properties often talk about is the lack of living space, because, like it or not, lounge rooms big enough to accommodate toys, books and kids’ other paraphernalia are generally found in big houses with three or four bedrooms. Not in the cramped conditions offered by two-bedroom semis or terraces. That could start a whole new discussion on housing design, and whether we need to shrink bedrooms and make room for more space that you actually spend time in when you are awake.

Carolyn Boyd is a property journalist and keen follower of Australia’s housing market.

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More Generation X parents are rejecting the suburban dream to raise their family closer to the city, fueling steep housing price rises.

The trading-up market is already seen as one of the strongest in Sydney’s property market, particularly among four-bedroom houses in inner-ring suburbs, according to the Australian Property Monitors economist Matthew Bell. "Most of those housing upgrades have been selling into what has been a strong first-home buyers market in previous years and the ripple effect of that is flowing upwards."

That market has also been boosted by a lack of stock.

APM figures show the median price for four-bedroom houses in inner-ring suburbs has increased 12.4 per cent in the year to June (to $1,595,000), compared with only 6.3 per cent (to $520,000) for similarly sized houses in the outer ring.

Inner suburbs well stocked with four-bedroom properties showed among the best median price growth in the past year, such as Longueville (up 43.75 per cent), Lane Cove (35.3 per cent), Randwick (31.25 per cent), Queens Park (21.2 per cent), South Coogee (36.9 per cent), Haberfield (10.9 per cent) and Marrickville (19.2 per cent).

The figures reflect comments by the demographer Bernard Salt about Generation X, aged in their 30s and early 40s, forming a "critical mass" of parents choosing to remain close to the city rather than move to fringes.

"Gen X are very lifestyle driven,” research director of RP Data, Tim Lawless said. ”They tend to want to work and play in the same area … the city usually. Gen X don’t want a yard to maintain. They want a short commute, with friends and retail nearby."

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Top tips to get you home sooner
It is estimated that 469,000 households will be suffering some degree of mortgage discomfort by December and the number of those in severe stress (facing a potential sale, foreclosure or forced refinance) could be as high as 267,000*.

How can borrowers at risk of mortgage stress reverse the trend, save money and own the property sooner?

Spokesperson for Mortgage Choice, Kristy Sheppard said, “There are shortcuts that can help borrowers avoid mortgage stress, reduce their loan term and the interest paid. It’s about taking control of their finances by managing their mortgage instead of letting it manage them.”

“Avoiding mortgage stress is often a greater challenge for new borrowers, many of whom are adapting to a budget for the first time. Of course, some common causes of mortgage stress are higher interest rates and rising living costs. However, another very common cause is over-indulgence in post-mortgage debt.

“Mortgage Choice’s 2010 Recent First Homeowner Survey revealed 15% of respondents had taken on within the first two years what they saw as ‘significant’ post-mortgage debt. Of those, 70% had spent between $0 and $20,000, 26% had racked up between $21,000 and $50,000, and 4% had really splurged, with extra debt of $51,000 or more.

“If these borrowers and others facing a similar situation want to better their mortgage situation they need to be proactive in their repayment strategy. By maintaining regular repayments above current interest rates, being disciplined in keeping to budget, making extra contributions, fully utilising the loan facilities available and regularly ‘shopping around’, borrowers can potentially fast track their way to outright ownership.”

Australia’s largest independently-owned mortgage broker, Mortgage Choice recommends these top tips:

Contribute to your change
Paying a little extra every month can have a big impact in the long run. Based on a loan of $300,000 at 7% over 30 years, if you round the monthly repayments of $1,996 up to $2,050, the loan will be repaid approximately one year and eight months earlier, saving you over $25,000 in interest.

Make a dent
Making a lump sum payment (big or small) into a loan can make a substantial difference. If you deposited your tax return of, say, $500 into the above mentioned loan, it would reduce the overall term by one month and the total repayments by just over $2,350. Doing so annually would make a significantly larger dent.

Make the most of loan features
Loans with offset accounts enable borrowers to link a savings account with their home loan account and ‘offset’ or use that amount to reduce the interest accumulated on their mortgage. For example, if a borrower has $5,000 in an offset account, then on a $300,000 loan (at 7% interest pa) the term would be reduced by around 1 year and the borrower would save over $33,000. It’s worth enquiring about but be aware there could be an ongoing cost for keeping the account, such as a monthly fee.

Don’t settle for second best
If you went for a premium loan you may be repaying at a higher interest rate for facilities and features you don’t need or use. Consider refinancing to a more basic product offering a lower interest rate – your repayments will be lower, and therefore you’ll be able to afford to pay your loan off quicker. When refinancing to a new loan and/or lender, be aware you may incur exit fees.

Give your loan a check up
If you already have a home loan, look at doing a home loan health check regularly because the mortgage market changes all the time. You might be able to get a better package now.

Keep your eye open for bargains
You might also investigate your eligibility for a ‘professional package’ home loan, where you can receive a reduced interest rate, no application or other fees, gold credit cards, and home insurance and other product discounts and benefits.

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Homes will be where the easy access is, says new building code to promote mobility.

A minimalist step-free shower; a corridor wide enough for a sofa; and a front entry you don’t have to wrestle the pram up.

These features are part of a voluntary building code to be released today by the Parliamentary Secretary for Disabilities, Bill Shorten. The code would improve a home’s value and also make life easier for Australians with mobility issues, advocates said.

An ageing population of baby boomers who dislike stairs and young parents wanting better safety for toddlers are key targets for the Liveable Housing Design, the consumer-facing brand of the code developed with the property industry.

The national convener of the advocacy group Australian Network for Universal Housing Design, Amelia Starr, said the fashionable step-free shower was already standard in homemaker magazines, while wider corridors were useful to anyone moving furniture.

US research showed 90 per cent of newly built homes would at some point have someone with a mobility issue residing there. Too many Australian homes were unable to adapt to a family’s evolving needs, let alone wheelchair use, Ms Starr said.

”We hope people will say I want that brand in my home because then it can be sold off to the widest range of people possible,” she said.

The Property Council of Australia chief executive, Peter Verwer, said: ”It makes good sense to design homes so they evolve with their users. It works as well for mums to be as it does for senior Australians.”

The new standards grew from several meetings between Mr Shorten and Therese Rein with industry groups including the Master Builders, Australian Institute of Architects, the Property Council and the Herald journalist Cynthia Banham. The last meeting was held two days before Kevin Rudd stepped down as prime minister.

The code will be launched today by Mr Shorten at a Penrith housing development that already adopts its features.

The Master Builders chief executive, Wilhelm Harnisch, said: ”Improving the safety of kitchens and other areas means people can stay longer in the home instead of going to an aged care facility.”

Story by Kirsty Needham www.smh.com.au

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