renovation planning: NEWS: Real estate predictions for Spring 2009

This spring selling season may be the final opportunity for homebuyers to purchase in a climate that has been affected for two years by the global recession, according to McGrath Estate Agents CEO John McGrath.
He says 2010 will be a strong growth year for property values, starting with well located quality homes between $1m to $3m and then moving north to the luxury home market in 2011. He also notes:

Spring will be strong with high buyer demand continuing, outweighing an anticipated increase in listing levels.

The likelihood of rate rises in the short term along with the upcoming expiry of the First Home Owners’ Boost will take some of the sting out of the sub $600,000 market but this should be balanced by an increase in investor interest and the growth of an economy looking to get back on its feet. We may see prices in this lower end plateau for the next 9 months while we see this rebalancing of key drivers.

The upper end recovery is well underway and will continue as the economy stabilises. Buyers in the prestige sector have re-consolidated their positions and are heading into Spring with money to spend in prestigious suburbs where prices have fallen 15% or more.

Our auction clearance rates in and around Sydney are now averaging above 70% compared to 46% at the same time last year. This is due to strong demand, limited stock, vendors realigning their price expectations with market values and quality versus quantity.

Rental yields remain high at an average 5.3% for apartments and 4.4% for houses. With a slowing of First Home Buyer Activity and unemployment rising in some areas we may see a slowdown of rental demand in 2010, but I still expect rents to increase by around 5% during calendar 2010 (I had previously forecast 5%-10%).

We may also see less activity among downsizers and Seachange/Treechange buyers over the next year or so as empty nester Australians delay their retirement plans due to weakened superannuation portfolios.

Good quality commercial property is starting to yield 8%-10% – up significantly from about 6% a few years ago. However, in this economy, there is some question mark on the security of commercial and retail tenants. Sometime during the next 12 months astute investors will return to commercial property, take on the reducing risk and secure the value before increases in 2011.

Expats are continuing to watch the market very closely via the internet. We’ve seen young expats utilising the First Home Owners’ Boost as well as families snapping up prestige homes for the future. This doesn’t mean they’re coming home on mass any time soon though. Despite perks such as housing allowances and free private school tuition being scaled back, offshore Australians are still the highest paid expats in the world.

Investment by offshore buyers, particularly from Asia, is growing due to our economic resilience in the global downturn and relaxed FIRB rules enabling temporary residents to buy established homes as well as new ones with no FIRB approval (a process that used to take 30 days). Foreign companies can now buy established homes for their local staff and up to 100% of new apartments can be sold to foreigners – up from 50%.

John McGrath's top value Sydney suburbs are:

Double Bay (-35%)*
North Avoca (-28%)
Bellevue Hill (-28%)
Palm Beach (-27%)
Seaforth (-26%)

12 month price changes for houses; Source RP Data on 3 August 2009

The best value locations for apartments are:
1.  Ultimo   (-43%)*
2.  Avoca Beach  (-27%)
3.  Balmain East  (-25%)
4.  Milsons Point  (-22%)
5.  Mona Vale  (-21%)* 12 month price changes for apartments; Source RP Data on 3 August 2009.