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For the past eight weeks, auction clearance rates in Sydney have hovered about the 80 per cent mark or just below. In Melbourne, they have mostly been above 70 per cent. Other states have not been as spectacular, but these high rates are interesting, given the season. Winter is not usually a popular time for property buyers, who are usually much more active in spring.

The Reserve Bank’s lower interest rates are obviously working, at least in some parts of the residential property market. CommSec chief economist Craig James says this demand is only for existing dwellings in very concentrated parts of the country. Even in the cities that are doing better, such as Sydney and Melbourne, it is in specific areas. ”There is strong demand for select suburbs, particularly those which are close to the city,” James says.

So if you are looking to buy a property, try not to get caught up in the hype at auctions. Do your research and make sure the area you are buying in is close to amenities, infrastructure and essential services.

If you are buying for investment, consider the services potential tenants will need. Will it be rented out by families, singles, couples or students? What will they want – access to public transport or public parks where kids can play? You can get an idea of the demographics of certain areas, and the percentage of dwellings in those areas that are owned outright, mortgaged or rented via the census data at the Australian Bureau of Statistics website. It also gives you an idea of median rent in the area and how that compares with the same state and the rest of the country. Property research companies might charge you for area reports, but they also give you a lot of good, free information, such as at homepriceguide.com.au, by Fairfax-owned Australian Property Monitors, and myrp.com.au, by RP Data.

However, while the established property market in some areas of Australia might be doing well, construction companies report that lower interest rates are hardly having an impact. James says there is plenty of construction going on at the moment, again particularly in the inner-city areas, but it hasn’t got to the market yet. ”Certainly the new housing sector is picking up off the floor … but it has some way to go,” he says.

And many have been putting off the construction of freestanding houses, as opposed to apartments, waiting the outcome of the election. ”People don’t want to do anything because of the uncertainty of the election,” James says. ”To build a new home requires a whole process; you have to hire staff, you have to go from the draftsman stage to the lock-up stage. To be able to buy an established property, that’s easy.”

There is, therefore, a chance that after the election, construction of new housing could start to pick up and the residential market, on the east coast at least, could be in for a period of very strong growth.

However, just like the rest of the economy, it’s likely to be two-speed or even three-speed growth, so if you’re looking for investment purposes, make sure you’re particularly diligent with your research before you buy.


Posted by Penny Pryor – Money Manager (Fairfax Media) on 1st September, 2013