The world is experiencing turbulent economic times at present. Recent commentary in the property market has ranged from “Property values will fall 30 – 40%” to “Property will recover and rise in 2009”. It is no wonder why a lot of people are adopting a wait and see approach however; opportunities exist for the savvy investor.
So let’s look at this commentary and also look at some back to basics and important fundamentals of the property market.
Prosper Group, who are licensed property buyers agents in NSW and QLD and who are transacting in the property market day in and day out, share some valuable insights with you.
Recently, University of Western Sydney economist Steve Keen stated that house prices are likely to fall by 40%, citing Sydney house prices as being nine times the average annual household income. He believes that this high ‘multiple’ cannot be sustained in the long term and further notes that the ratio of ‘debt to income’ in Australia has increased dramatically since 1965.
The International Monetary Fund (IMF) has recently stated that Australian house prices have become over valued by 20%.
On the other hand, ANZ economists suggest that the ratios used by the IMF and other commentators such as ‘price to rent’ and ‘price to income’ ignore some of the fundamental drivers of property prices in Australia. ANZ notes some of these key drivers as being, rapid population growth, restrained housing supply, good demand for properties that have limited supply potential (scarcity) and credit still being widely accessible.
BIS Shrapnel managing director Robert Mellor is also more optimistic, he expects prices to gradually recover in 2009, led by growth of up to 3% percent in Brisbane and Sydney. He notes that ‘in the US, there is clearly an oversupply of housing, combined with much tighter lending conditions and in the UK there has been even greater restrictions placed on loans’.
Mellor said by comparison Australia still has good availability of mortgage finance and a clear under supply of housing stock. Even though he expects unemployment to rise - to 6% by the end of 2009, he notes that the increase in unemployment in 1997 – 2001 did not lead to ‘sustained decreases’ in property prices.
Prosper Group director Chris White says, ‘as buyers agents we are in the property market buying day in and day out’ and see first hand the realities of the market, this includes what areas are rising and declining and the level of vendor motivation and price discounting.
White believes that there are currently, especially in the better areas, floors and ceilings with property prices. Many buyers are bargain hunting and similarly many vendors are holding off selling until conditions improve. This gap between buyers and sellers is evidenced by the reduced auction clearance rates and also by the reduction in the volume of property being listed for sale and therefore fewer sales.
On the back of the negative commentary savvy buyers continue to find great opportunities as some vendors are being forced to sell, therefore discounting heavily to meet the market. In context, whilst this statistically flows through as a decrease in property values, one should also consider that there is a lower volume of properties being sold.
White says “Serious Property Investors" have a good opportunity to capitalise on current market conditions.
”The key for buyers is to sift through the opportunities available and find the gems that are out there’. This is a window of opportunity which buyers have not experienced in recent years.
Prosper Group are the leading property buyers agent in Sydney and Brisbane.
To discuss your property needs with one of Prosper Group property consultants and Buyers Agents please call us on 1300 664 373 or e-mail us at enquiries@prospergroup.com.au
More information may be found at www.prospergroup.com.au
