Record high Aussie dollar – implications for property markets

Aussie dollar hits record high

In high demand - Australian currency

On the back of a successful US $29 billion auction of US Treasury bonds, improving sentiments in the local equity markets combined with China’s announcement that it is cutting the export quota for rare earths by 35% in the first half of next year,  the Australian dollar has hit a new 28-year high of 101.98 US cents at 12.45pm eastern daylight time, the highest level since the currency was floated in the early 1980s.

As a result, Australia’s emerging rare earths producers and explorers are enjoying a year-end surge in value as investors chased down their stocks. ASX-listed developer Lynas Corp surged 11% or 17.5 cents to $1.795 while Arafura climbed 13.5 cents to $1.355.

This development is adding more fuel to the strength of the dollar which has been widely seen as being overvalued by many analysts. Local businesses and corporations involved in tourism, education, manufacturing and exports are already feeling the wrath of the Aussie dollar as their products become less expensive in international markets.  The emerging rare earths market will further drive a wedge between Australia’s 2-speed economy whereby the mining and exploration industries are powering ahead with strong sales performance whilst the rest of the economy is lagging behind.

Job activity, increase in new property sales and the influx of new workers in some mining towns are already putting pressure on prices of certain type of properties. Investors have started investing in these towns some of which have seen house and land package developers increasing prices as each new phase is rolled out. Property markets across Australia will become even more fragmented whereby there will be an increasing number of suburbs and locations with strong growth, plateauing and declining, all at the same time albeit at varying degrees. Interest from overseas investors have declined steadily as the dollar grew from strength to strength.

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Tree change paradise in Orange, New South Wales

Canola fields along Excort Way, Orange

Canola fields along Excort Way, Orange

In recent years, many Sydneysiders have been looking for a lifestyle change in coastal and country towns to escape the stress and congestion of city living. One such town that has been slowing making its mark is Orange in the heart of central New South Wales.

Located approximately 250km and a leisurely 3.5 hour drive from Sydney, Orange offers a more quiet and peaceful setting whereby locals can enjoy a booming food and wine culture, fine dining restaurants which have garnered rave reviews from the Sydney Morning Herald Good Food Guide, vast open spaces, good local schools, medical facilities and most importantly, affordable housing and real estate.

Table for lunch, one-hatted Lolli Redini restaurant

Table for lunch, one-hatted Lolli Redini restaurant

Food and wine culture

Food and wine culture - cooking school

Property prices in Orange have enjoyed an average annual growth of about 9% over the last 10 years and recorded a growth of about 8% in the 12 months to August 2010 during the recent property boom. New mining activity and a proposed new hospital in the south of Orange has boosted employment in the area and augurs well for investors in the future. Charles Sturt University has also established a new dentistry department on campus.

Local real estate agent and principal of Ray White Orange, Libby Seaman, said there seems to be little slow down in activity in Orange despite the slow down in sales activity, auction clearance rates and price growth in Sydney and Melbourne in recent months.

Real estate in Orange

Do me up - old home in Orange

Another agent, Christine Norris who is licensee of PRD Nationwide Orange said investors in Orange are mainly from Sydney who are looking for investment opportunities which have solid growth rates and strong tenancy demand as a result of local schools especially in east Orange and new growth and development areas to the north of the city.

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12/94 Yorktown Parade, Maroubra

Maroubra-bay

Simmering - Maroubra Bay on a perfect day

Asking price: $600,000 +

2 bedroom, 2 bathroom, 1 car space

This two bedroom apartment in this popular location boasts open plan design in a quiet street setting, wooden flooring and a private courtyard and a Juliet style balcony on the second level.

Levies: $812.00pq
Council: $1,027.00pa
Water: $553.00pa

Agent: Billy Couldwell McGrath real estate agents Mobile: 0416 713721

This property was sold for $595,000 in January 2011.

Floor plan Unit 12, 94 Yorktown Parade Maroubra

Facilities of this apartment include the following:

  • Good size bedroom with built in wardrobes and Juliet style balcony
  • Modern tile bathroom / ensuite
  • Beautiful wooden floorboards throughout the living and dining areas
  • Modern open plan kitchen with dishwasher, stainless steel appliances and gas cooktop
  • Private courtyard which is great for entertaining and weekend barbeques
  • Internal laundry and clothes dryer
  • Intercom security
  • Undercover security parking
  • Separate storage cage

Why I like this street and location:

  • Yorktown Parade is a whisper quiet street off busy Fitzgerald Avenue which leads to Maroubra beach.
  • This unit is located only 500 metres from Maroubra beach and its attractions which include cafes, restaurants, McMahon pool, picnic and recreational spots and breath-taking views of the ocean.
  • A bus stop right in front of this block of apartments offer direct / express bus service to the city and Circular Quay
  • This location is only 1.5km to the vibrant Pacific Parade’s commercial and retail hub at Maroubra Junction which include cafes, restaurants, banks, post office, shopping, Coles supermarket and many more conveniences.

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4/94 Yorktown Parade, Maroubra

94, Yorktown Parade, Maroubra

94, Yorktown Parade, Maroubra

Asking price: $450,000

1 bedroom, 1 bathroom, 1 car space

This charming 52.5sqm one bedroom apartment in this popular location boasts wooden flooring and an 11sqm sunny outdoor terrace.

Levies: $486.80pq
Council: $254.00pq
Water: $138.25pq

Agent: Paul Maule, Carrington Group, Surry Hills. Mobile: 0421 714442

As listed on domain.com.au

4/94 Yorktown Parade, Maroubra, NSW 2035

FOR SALE: 4/94 Yorktown Parade, Maroubra

Facilities of this apartment include the following:

  • Good size bedroom with built in wardrobes and Juliet style balcony
  • Modern tile bathroom / ensuite
  • Beautiful wooden floorboards throughout the living and dining areas
  • Modern galley style kitchen with dishwasher, stainless steel appliances and gas cooktop
  • Private courtyard which is great for entertaining and weekend barbeques
  • Internal laundry and clothes dryer
  • Intercom security
  • Undercover security parking
  • Separate storage cage
4/94 Yorktown Parade, Maroubra

Galley style kitchen

Why I like this street and location:

  • Yorktown Parade is a whisper quiet street off busy Fitzgerald Avenue which leads to Maroubra beach.
  • This unit is located only 500 metres from Maroubra beach and its attractions which include cafes, restaurants, McMahon pool, picnic and recreational spots and breath-taking views of the ocean.
  • A bus stop right in front of this block of apartments offer direct / express bus service to the city and Circular Quay
  • This location is only 1.5km to the vibrant Pacific Parade’s commercial and retail hub at Maroubra Junction which include cafes, restaurants, banks, post office, shopping, Coles supermarket and many more conveniences.

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It’s official – Australia in a 2-speed economy

Glenn Stevens - Governor of the Reserve Bank of Australia

The economic imbalance of Australia’s economy is official. Governor of the Reserve Bank of Australia, Mr Glenn Stevens had previously warned of the massive demand pull generated by Australia’s booming mining industry whilst the rest of the economy is stuck in the slow lane. Official employment figures from Access Economics for the year to the end of August 2010 showed that employment in the mining industry rose by 16% and construction by 3% as more workers are drawn to the resources boom. At the same time, more than 22,000 jobs were lost in manufacturing, down 2% in the past year and the arts and recreation sector, which takes in the embattled tourism sector, fell by 4.5%.

Whilst workers are flocking to the mining industry in droves, the high Australian dollar is pushing some of the nation’s most iconic industries to the brink.

It is not new the mining boom in the early to mid 2000’s has created more wealth in mining states like Western Australia. However, coupled with the high dollar as a result of the boom, firms which are exposed to the export market are severely affected as their products become less competitive in the international market.

John Haines, chief executive of Haines Group, one of the nation’s largest boatbuilders, says his manufacturing operation will soon switch to a four-day week.

“We are down 60 per cent and we are pulling back to a four-day week,” he said. “We are taking extended holidays over Christmas hoping that we might see some more work come in. I speak to a lot of our competitors, and they are all the same.” . The issue is complicated by cheap imports from the US. Mr Haines said a 6m Australian boat that would normally sell for up to $60,000, was facing competition from second-hand US boats selling for as little as $15,000. He said this would affect the market for years to come.

Brad Teys, the chief executive of Teys Brothers Holdings, which kills about one million cattle a year in Queensland and South Australia, said the high dollar was squeezing beef producers because contracts were written in US dollars. “I’d say it would be very marginal for them – their costs are increasing diesel power, fertiliser, water, rates and I’d say most people would be finding it very difficult in the cattle industry,” he said.

Graham Packer, whose Packer Leather makes the covers for Kookaburra cricket balls, said the company was being squeezed by a high dollar on the one hand and high interest rates on the other. It was looking at taking some production overseas and finding cost savings.  “We’re getting pressured to reduce prices as a result of our currency and our internal costs,” Mr Packer said.

“They don’t want to pay the increased prices and what the currency is doing to us, we are feeling a horrible squeeze. Between the banks and their wretched interest rates and their risk margins . . . and the high dollar, we are getting squeezed from both sides.” He said the company could survive with a dollar at US85c but at near-parity “you just keep believing that things will change”.

“Success comes from doing things differently”– Steve McKnight

Steve McKnight

Steve McKnight

Steve McKnight is a full time property investor, award-winning author and ex-Chartered Accountant who bought his first property for $44,000 in Ballarat back in 1999. Since then, Steve McKnight has founded propertyinvesting.com, a successful website and forum which has taught thousands of ordinary Australians about property investment. His book, From 0 – 130 properties in 3.5 years is Australia’s most successful real estate book ever. Steve McKnight - 0_130_properties_3.5_years

One of the key tenets which Steve McKnight advocates in property investing is to do things differently, that is, to try not to follow what the general investing public is doing or adopting a “herd mentality”. Many investors think that buying real estate is about getting in at the right price, find a good tenant and wait for capital growth to propel the investment forward.

However, savvy property investments are much more than find a good property to buy. It involves a detailed understanding what drives our property markets, its players, effective tax and ownership structures, financing options, how to “manufacture” equity and getting the investment dollar to work at its optimum rate. Steve McKnight’s techniques are about risk and return, using cashflow positive properties to continually drive towards a self-sustainable portfolio, minimising negative gearing and to sell when the time is right.

Many investors are against cashflow positive investments due to its location and perceived poor capital growth rates and even more are in favour of negative gearing as a form of tax minimisation. Still, some investors hold the adage that you should always buy and never ever sell due to its transaction costs, capital gains tax and so forth. Steve McKnight’s answer is there is no one single solution for every investors because investing depends on individual needs, risk profile and desired outcomes and he has proven that by doing things differently, we open ourselves to greater opportunities, albeit sometimes at a higher but calculated risk and have a detailed plan in ensuring that contingencies and other unforeseen have been taken into account.

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Risky business–buying off the plan in a flat market

Construction site - buying off the plan

Construction site in Thailand

Buying a property off the plan means that you are buying it before it has been built. In our most populous capital cities of Sydney and Melbourne, this form of purchase will only get more prevalent as the population grows. As it is, there are a multitude of medium density housing, that is units and apartments, land and house packages that are available on the market in many suburbs which are further away from the CBDs.

One of the most attractive propositions of buying off the plan is that you are buying a property in the future at today’s prices. In a strong and bullish property market, this may result in a large capital gain on paper by the time you move in and indeed, many speculators have made huge sums of money this way. The key assumption here is that prices will rise in the future. But what happens if we are in a flat market or there is an imminent downturn in the property cycle? It becomes extremely risky for the following reasons:

1. Reputation of the developer – This is a key factor as experienced developers are more likely to complete the project on time, within budget and in accordance to the terms and conditions of the contract of sale. Some of Australia’s most prominent developers are listed on the Australian Stock Exchange and although this is no guarantee of quality, it provides some level of credibility over smaller ones, especially during flat markets. There have been developers who “flee the scene” during financial hardship where deposits from buyers have already been collected.

2. Rising costs of construction – Today’s developers are faced with ever rising cost of land, construction materials, labour and finance charges. Buying an apartment off the plan is no longer a straight formula of calculating the price per square metre because developers also need to make a fair profit for the risk they undertake. As a result, apartments sold off the plan are becoming increasingly expensive in absolute dollar terms. The task of the skilled developer is to be able to balance “perceived value” against the asking price and as a buyer, you need to be able to carefully determine and quantify what this value is. Many newer apartments are smaller in size and there is an increasing number of new one bedroom apartments within close proximity to CBDs that do not come with a car space. This, in part, is also due to changing demographics such as smaller / single households, rising value or real estate around CBDs and significant marketing and holding costs.

3. Stagnant prices – In a flat market, the off the plan buyer is essential bearing a significant amount of risk because prices today are likely to be prices in a couple of years time with little or no upside. Unless off the plan buyers are also intending owner occupiers, it makes little sense as an investment proposition in a flat or downturn cycle.

4. Occupant profile – Many new apartment blocks are now being marketed to foreign and overseas investors and in some cases, a very significant majority of eventual occupants will consist of tenants as opposed to owner-occupiers and unless management and body corporate maintenance is effective, these apartment blocks will depreciate more quickly and worse still, develop a stigma of having very transient occupants and affect future capital growth.

5. Finance approval – Due to tighter lending guidelines, major banks now have restrictions of 15% for lending to any one off-the-plan project to limit their exposure to inherent risks. In many cases, pre-approval cannot be given as bank valuations will only be done at the “lock-up” or completion  stage of the project. Even after obtaining finance approval for these project, one may encounter issues with getting the desired  Loan to Value ratio as this is dictated by the bank’s valuation.

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2011 – Investment strategies for a year of consolidation

Investment strategies for 2011

Melbourne - stellar market performer of 2010


2010 – The Year of Robust Growth

This time last year, I was finalising my research and due diligence which eventually lead to the purchase of two properties in Melbourne in December 2009. I vividly remember market sentiments were mixed – there were bargains in good suburbs and at the same time interest rates have began to move from its 49-year low of 3% in September 2009. Investors were cautious because the outlook in employment was still uncertain and the media was sending out conflicting messages of both recovery and gloom. Fast forward a year and in hindsight, the performance of most property markets across Australia, especially Sydney and Melbourne from the beginning of 2010 to May 2010 was the strongest in many years. Auction clearance rates were in the 80% in major markets although it should be remembered auctions account for a mere 10% of all property sales in Australia.

Prices continued to firm in the second half of the year although the seven interest rate rises since October 2009 have obviously taken effect in slowing down the market and if the auction clearance rates are any indication, it is pointing towards a slower 2011.

As I write this review a year later, I don’t feel the same “pulse” as I did during the Christmas season a year ago because prices and interest rates have both surged. In short, the investment climate has changed significantly during the year and 2011 calls for increased caution.

Key Observations

Some key observations through 2010 include the following:

  • Strong performance of some city fringes suburbs over inner city locations

KPMG demographer Bernard Salt has found the fringe suburbs of Wyndham Vale, Werribee and Melton precincts in western Melbourne to be the fastest growing area in Australia with 18,000 new residents over the year. At the same time, inner city hotspots such as Middle Park and South Yarra experienced modest growth at best. The traditional preference of staying close to CBDs and inner city areas are proving increasingly more difficult and many first home buyers are coming to more realistic terms about starting out in suburbs a little further away just to get a foot into the property market. I foresee this to be an increasing trend as fringe city suburbs and so-called second-tier areas with good transport links and public amenities herald and perpetuate “sub-markets” – that is, cluster of suburbs or areas within major capital cities which may have its own “pulse” and demand drivers which may move contrary to general market trends.

  • Apartment growth rates outperforming landed property

Traditionally, many property investors have the mindset that landed property with freehold titles have much higher growth rates than apartments and strata-titled properties. The CEO of Residex John Edwards had correctly predicted the growth rate of apartments will increase more substantially and 2010 had seen many suburbs with predominantly median density housing recording very strong growth rates over those with landed properties. In general, apartment growth rates are on par with landed property in many major capital cities with changes in demographics such as smaller households, single occupants and affordability being the key factors influencing this change.

  • Melbourne now most expensive city in Australia

By far, Melbourne has been the stellar property market in Australia over the 2009 and 2010 period where strong surge in property values have seen some areas such as Sunshine grow by as much as 50% over the year. Couple with slightly lower wages in general, analysts believe that Melbourne has now overtaken Sydney to be the most expensive capital city in Australia to buy a home. Melbourne has also seen very strong net immigration where some 1,700 new residents call her home each week. Melbourne has a relatively strong State government which is continuing to boost its status as an international city with a relatively high standard of living.

What will 2011 hold for property investors?

2011 will be a year of consolidation where previous strong capital gains will be countered by slower growth rates due to a rising interest rate regime. Most industry analysts are anticipating at least 2 more interest rate rises. For this reason, I foresee 2011 to be generally a buyer’s year where there will be an increased level of stock in most markets across Australia. Conservatively, I believe investors should budget for a full 100 basis points increase in the current cash rate of 4.75% to 5.75%.

In recent times, the media in the form of newspapers, property reports from industry analysts, experts and finance commentators among others have played an increasingly influential role in investor sentiment and confidence. There are many mixed messages and this seem to add more confusion than to actually clarify issues and give clear indication of where our property markets are heading. There are approximately 2,650 suburbs which investors can buy real estate in Australia. Each state within Australia has its own property cycle and within each state, cluster of suburbs and different locations are experiencing increasingly different trends and growth rates as our property markets become more sophisticated due to increasingly sophisticated demographics and factors which influence its dynamics. Therefore, although 2011 is generally tipped to be a buyer’s year, it should be acknowledged that our property markets are becoming increasingly fragmented as a result of the above. There will be areas where property prices will be flat or falling and at the same time, there will also be suburbs and / or types of properties that will be bucking the trend. In this regard, investors should do their homework and conduct due diligence in a very systematic and consistent manner in order to fully understand the areas or suburbs they wish to invest in. Generally, I would advise investors to take media commentary with “a pinch of salt” and do their own research.

Investment strategies 2011

Personally, I would advocate the following simple strategies for 2011:

1. Reduce debt and value add

As interest rates rise, it will be prudent, if possible, to try and reduce borrowings so as to reduce exposure in the event there is a down turn in the property markets. Although capital growth is expected to slow, rental rates for well-located properties are expected to further increase due to interest rate pressures. Sprucing up your investment properties will allow you to command better rental returns and coupled with reduced debt levels, this strategy will negate or minimise the effects of the anticipated higher interest bills for 2011. Renovating your properties, subdividing and developing are great ways to “manufacture” equity and grow your portfolio during flat markets.

2. Do your research and devise a game plan

What is becoming increasingly important is due diligence of an area or suburb over a period of what I believe to be at least 3 – 4 months. The research should necessarily include property inspections, attendance at auctions, observing demographics of residents, buyers, investors, tenants, type of housing which are in demand or over supply, best and worst streets, prices trends, proposed infrastructure, public and private investments in order to gain a good appreciation and understanding of the suburb in detail. Developing strong local networks with real estate agents are also imperative to gain a good source of information before taking the plunge in 2011. Lastly, do have a detailed game plan which include desired outcomes, strategies and action plans, time frame and contingencies.

3. Watch out for emerging suburbs

As interest rates are anticipated to further rise in 2011, housing unaffordability will become an issue again with both investors and first home owners alike. This will fuel demand for “newer” or emerging suburbs which have previously been overlooked and now seem more attractive. In particular, I would target areas where public transport are being planned or upgraded, suburbs or cities with new infrastructure investments and public amenities such as shopping malls, hospitals, schools and mining activity although the last item requires a lot more caution and good due diligence.  Suburbs which are close to areas which have previously experienced strong capital growth may reap spill-over effects in times where growth is slowing down. Second, third and even forth cities within each state in Australia should also be considered seriously especially those which are within close proximity to capital cities.

4. Look beyond our shores

One of the key dynamics of 2010 is the rise and rise of the Australian dollar. The little Aussie battler is widely tipped to trade above parity with the US dollar as the largest global economy continues to struggle and ease monetary policy to stimulate its faltering economy. However, the obvious caution from forex experts is that the dollar is currently trading well above its long term average. Foreign investors which have previously found Australia to be a good investment destination will find Australian real estate to be increasingly more expensive whilst local investors will do well to look beyond our shores to find bargains as a result of the strength of the Aussie dollar. These markets may include those closer to home such as Thailand, Singapore, Malaysia and Indonesia. For the more adventurous in markets further away from home, the US, UK and certain parts of Europe present great opportunities with strong yields due to their struggling economies. Although strong gains are not expected anytime soon, this may be an alternative strategy to hedge your currency in exchange for good yields in the event the Aussie dollar retreats.

Albert Wong is economics editor for wealthruproperty.com
Disclaimer: Views, opinions and comments expressed in this article are general in nature and do not constitute investment, legal or financial advice. Readers are advised to seek their own professional advice as and when required.


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Treasurer Wayne Swan outlaws bank exit fees

Treasurer Wayne Swan

Treasurer Swan - mortgage exit fees to be banned

In a move to create more competition among lending institutions in Australia and to provide disgruntled bank customers to switch home loans without penalty, the Federal Treasurer has announced plans to ban mortgage exit fees which has been largely blamed for dampening competition by making it prohibitively expensive for mortgage holders to switch to cheaper loans.

The new ruling is to take effect from 1 July 2011. This new banking competition package also includes a plan to give the Australian Competition and Consumer Commission greater powers to stamp out anti-compeititive behaviour by the big banks such as price signalling.

In  a bid to help the smaller rivals of the big banks to reclaim a larger share of the lending market, the government is launching a “government-protected deposits” symbol – designed to provide comfort to customers that their money is just as safe and secure with credit unions and building societies as it is with the big banks. The symbol is part of a broader plan to make smaller lenders a “fifth pillar”, in addition to the big four banks. The measures are anticipated to anger the banking sector, which argues that banning mortgage exit fees would merely force smaller lenders to raise other charges to offset the lost revenue. But Mr Swan said he wanted to empower customers to “get a better deal and help smaller lenders put more competitive pressure on the big banks to do the right thing by their customers”. Under the changes, the ACCC will get new powers to crack down on so-called price signalling, an anti-competitive behaviour where the banks publicly announce their intentions to lift interest rates.

ACCC chairman Graeme Samuel said the practice, which has been outlawed in several countries, removed a level of competition from the lending sector by giving rivals a ”degree of comfort” to also lift their interest rates above any Reserve Bank rate without suffering a competitive disadvantage. ”It gives them a comfort level that avoids the sort of competitive tensions that we like to see take place,” he said. Consumer groups and the Greens have backed strongly the idea of banning mortgage exit fees in Australia, where they are the highest in the world. A Fujitsu Consulting report found that Australian lenders had charges for exiting mortgages early, with an average fee of $1500, compared with $400 in Britain and $550 in the US.

The Australian Securities and Investments Commission has already announced a crackdown on excessive fees. But the measure to ban them will be contested by the big banks. Australian Bankers Association chief executive Steven Munchenberg said most mortgages exit fees reflected genuine costs and banning them would hurt smaller lenders most. ”It is much harder for smaller lenders to distribute costs across their business, unlike the major banks,” Mr Munchenberg said. He was also concerned about giving the ACCC extra powers on price signalling. He said lawyers of big banks would be warning executives not to comment about funding for fear of attracting negative headlines and accusations of anti-competitive behaviour.

The opposition also remains opposed to banning mortgage exit fees, although shadow treasurer Joe Hockey favours stronger powers for the ACCC.

Bank penalties

  • Commonwealth Bank $700 in the first four years.
  • Westpac $700 in first fouryears.
  • ANZ Nil (was $700 in  first fouryears but  scrapped last month).
  • NAB Nil (was $900 in  first fouryears until this month).
  • CitiBank First year $1500, secondyear $1200, third year $1000.
  • AMP $1000 in  first fouryears.
  • ING Home Loans First year $1500, second year $1050, third year $700, fourth year $350.
  • Suncorp $1400 to $800 in  first fouryears.
  • St George $1000 in first three years.
  • RAMS 1% of  original loan amount in  first three years.
  • Bankwest Nil.

Why we Aussies love our properties

Top 3 melbourne $400kTop 5 Melbourne $700k top 5 melbourne $500k

A recent study by Mortgage Choice 2010 Consumer Sentiment Survey has revealed that Australian’s passion for property has not waned despite seven interest rate rises since October 2009. In fact the survey indicates that we are more worried about the rising price of electricity and water over the prospects of more interest rate rises in 2011.

The majority of respondents in the survey believed that banks will increase rates before June 2011, many anticipating a rise of between 0.25% to 0.5%. One third of respondents are still hoping to buy a property in the next two years. Of these respondents, around 35% will be buying an investment property, 30% will be purchasing their first home and 34% will be relocating, that is, buying their next home. We are also a renovation nation with a third of respondents planning to renovate their existing property within the next twelve months.

More than half he respondents in both Victoria and NSW / AT believed that property prices will increase in Australia over the next twelve months and just under a third believed prices will remain stable. In regards to the ongoing debate that claims house prices are unaffordable in Australia, about 50 per cent of respondents believe the argument is ‘about right’ while around 30 per cent think it is ‘underrated’ (that is, that housing is even more unaffordable than is being debated), while 12 per cent believe the argument is ‘overrated’.

So what is it that we love about property? Here are the top reasons:

1. “I want to set myself up financially for the future” – 50% of respondents

2. “We trust property investments more than the sharemarket” – 28% and 35% of respondents from, NSW / ACT and Victoria respectively

3. “I want to or need to relocate” – giving us a reminder that property is not only a financial investment but a very practical and fundamental part of our lives

Other popular reasons include:

4. “I want to get my foot in the property market door”

5. Rising rents make purchasing property more attractive”

6. “Tax benefits”

Many respondents were willing to make major sacrifices to get into the property market and these include:

  • Cutting back on spending to make a property purchase possible – 90% and 80% for NSW / ACT and Victoria respondents respectively
  • Forgoing an overseas trip / holiday (we also know how we Aussies love our vacation!) – 56% and 49% for NSW / ACT and Victoria respondents respectively
  • Trying to remain in their current job – this may imply  people being in well-paid jobs which they are not enjoying
  • Take on an additional job – 15% and 20% for NSW / ACT and Victoria respondents respectively
  • Change jobs to get higher income – 10% in both NSW / ACT and Victoria respondents (26.8 per cent in NSW/ACT and 37.3 in Victoria), or purchase in a non-ideal location (26.8 per cent in NSW/ACT and 21.6 per cent in Victoria). Around 10 per cent of respondents said they will move towns or move interstate to a more affordable property market.

Many are also realistic about their desires and said they will be purchasing a less expensive property than desired. Starting a family was also being sacrificed because of the push for property, with 7.3 per cent in NSW/ACT and 13.7 per cent in Victoria saying they were delaying starting a family as their sacrifice for property.

What are your views and concerns?

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