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While the world markets are experiencing a level of volatility,
due mainly to the US sub prime situation, the residential property
market in Australia is continuing to deliver strong and reliable
returns for investors, with more growth predicted in 2008.
The ANZ banks’ January 2008 Economic Report stated that ”in raw
terms, since 1984 residential property has enjoyed an extraordinary
growth of 13.4% (slightly lower than 13.8% for equities). But in
risk adjusted terms, residential property has delivered vastly
superior returns to all other broad asset classes.”
In fact, house prices have virtually never experienced a fall in
value over the past 23 years. As a result, we are noticing a
tightening in the housing demand and supply balance today, with
residential prices and rents continuing to rise – all of which
leads to greater returns on investment in residential property.
The average median house price in Australia was 2.7% higher in
the last quarter of 2007 than it was in the June 2007 quarter and
7.5% higher than the September quarter of 2006.
A report by Matusik, released in October 2007, noted that the
underlying demand for new housing across Australia currently sits
at just under 170,000 homes per year, which means that “we need to
build about 450 new homes across Australia every single day.” The
rising interest rates and increasing construction costs and limited
land availability have delayed the recovery in the building market,
thereby creating upward pressure on housing markets…which, if it
continues, will lead to an increasing shortage of houses over the
coming years.
In Melbourne, population growth is driven largely by immigration
and is placing pressure on the underlying demand for housing. As a
result, residential property prices are experiencing greater growth
than has been seen in years. In December 2007, median house prices
in the Melbourne residential property market increased by 24.7%,
with the greatest increases seen in inner and middle area
suburbs.
Melbourne’s vacancy rate currently sits at 1.2%, which is down
from 1.6% seen in July 2007.
Capital growth over the past 12 months (Residex, January
2008)
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Units
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Houses
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%
capital growth last year
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%
capital growth last year
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Melbourne
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19.6
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23.5
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Sydney
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6.9
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9
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Brisbane
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15.2
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18.9
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Perth
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3.1
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2.2
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Adelaide
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17.8
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Direct Property Investment
© Wealth Stream 2008
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