NEWS:

Last up-dated 05/01/2010

1.   Has the property market now turned?

2.   Growth and how it is measured, (RPT)

1. Has the property market now turned

In 2008 we saw property prices plunge in line with financial market falls. Financial market indicators such as the all ordinaries which saw levels at 5,464.90 in December 2006, 6,595.40 in December 2007, only to fall to 3,669.80 in December 2008 a fall of approximately 45%.

Note: (4,712.00 December 2009 + approximately 29%).

In general terms we saw property prices fall approximately 10-15% with the top end falling as much as 35%+.

These property falls translated back to prices seen and achieved in 2005 and 2006, wiping out growth seen in late 2006, 2007 & early 2008.

We have now experienced some growth in late 2009 of approximately 3-5%.

Some property data information providers have reported growth of up 11%, however these figures most likely include renovations and additions, all on the back of the DIY (Do it yourself) renovation craze from the later part of the decade.

Note: As a rule of thumb, most properties under go renovation every 5-10 years, with the average spend being approximately 5% of the properties value with DIY renovations expecting to make further profit. 

Given market indicators such as inflation CPI, Consumer Confidence, Employment Levels and Financial Market Gains, we should see measurable property growth in 2010 of a speculative 5-8%, mainly hinging on the withdrawal of the government grants.

Other factors which may hinder growth in 2010 are the expected interest rate rises, which could see the Reserve Bank lift its rate from 3.75% to 4.5%-5.25% reflected by financial institutions to 7.25%-8.75% on standard variable home loans.

We do note that property markets have traditionally recovered faster than historical growth leading up to past prices which we saw in late 2007 and early 2008. 

2. Growth and how it is measured (RPT from News 07/01/09)

In the past decade we have seen massive improvements in the recording of property data. This data has been then used to correlate graphs and statistics on markets, which is then interpreted for various reasons, commonly by vendors and purchasers to track growth.

Properties turn over approximately every 7 years, and approximately 70% of those properties sold have been renovated, had additions added or have been completely re-built.

This past decade has also seen the boom in not just the Real Estate market, but the home improvement and DIY sector.

Be sure of an areas true growth and be aware of renovations, additions and fully re-built properties, including any major suburban developments that have been incorporated into growth figures.