First homebuyers improve rental vacancy

Melbourne’s outer suburb vacancy rates have improved from 0.7 per cent to 1.8 per cent in the past six months, according to the Real Estate Institute of Victoria’s April vacancy rates.

The vacancy rate across Melbourne is reasonably steady having been between one and 1.4 per cent for 12 months.  However it‘s significant that there’s a recorded improvement in the outer suburbs.

The improvement could be due to the number of first homebuyers that are moving from their rented accommodation into their own home with the assistance of the grants, bonus and boosts.

The March quarter median prices showed that most of the activity in the marketplace has been in the outer suburbs; for instance Craigieburn, Melton South, Hillside, Epping, Caroline Springs, Werribee and Meadow Heights – all outer suburbs of Melbourne popular with first homebuyers.

It‘s great news for renters if a by-product of the grants, bonus and boosts is an improvement in the availability of rental accommodation, however monitoring of the situation over the next few months to will tell of continual improvement..

We would consider that the rental market would be in balance once we reach a Melbourne-wide vacancy rate of three per cent.

In the last month the figures from our REIV members have shown a very minor change in the inner suburbs where the vacancy rate moved from 1.5 to 1.3 per cent and in the middle suburbs where it moved from 1.4 to 1.3 per cent.

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Top growth performing suburbs

The rich list has been announced and the top performers for both houses and units were areas of NSW.

RP Data released its top price growth suburbs, recording the greatest increase in median house and unit prices during the 12 months to December 2008.

North Sydney suburbs were the standout performers for both houses and units with median house prices appreciating 47.4 per cent in McMahons Point and unit prices growing 49.8 per cent in Greenwich.

The NSW list comprised mainly areas outside of Sydney and includes Dubbo, Jindabyne, Queanbeyan East and Brunswick Heads.

Victoria was a different story with only one area outside of the metro area making the list. Irymple in Mildura was the regional victor experiencing a median unit price increase of 35.3 per cent.

The Victorian results mainly comprise of areas in the Melbourne Statistical Division with both the top performers – Portsea’s median house price increase was 38.6 per cent to $1,455,000 and Dallas’ median unit priced leaped to $222,500, an increase of 48.3 per cent.

The QLD market showed many areas outside of the Brisbane area as strong performers in capital growth.

The state’s top performers are houses in River Heads at Hervey Bay with prices increasing 43.1 per cent and units in North Lakes increasing by 47.3 per cent.

South Australia’s winners are dominated by areas of Adelaide with only Port Hughes, Roseworthy and Owen outside of the capital city location.

The standout performers for houses is Teringie (49.5 per cent) and for units Underdale (47.8 per cent).

The strong growth results centred around Adelaide aren’t a surprise given that it remains mainland Australia’s most affordable capital city market and has been an excellent performer throughout 2008.

Perth dominates the WA list. Which is surprising given the poor performance overall of the Perth market during the last 12 to 18 months.

Homes in Coolbinia are a standout, with a median price increase of 43.1 per cent. Units, the port side suburb of South Hedland saw the greatest increase jumping 44.4 per cent to $455,000.

Outside Perth, the list is exclusively populated by areas linked to the mining and resources sector.

For Tasmania, the top performer for houses is Campania, recording a 46.3 per cent, and units saw Hobart taking top spot with 35.7 per cent!

Northern Territory winners are almost entirely located within Darwin, with Virginia recording the strongest growth in houses (30.9 per cent) and The Gardens topping the list in units (39.0 per cent).

Throughout the ACT, the strongest performing suburbs are within close proximity to the city centre – Franklin’s houses recorded a 25.6 per cent increase and Campbell’s units 49.7 per cent!

Victoria

Houses

Units

Cheap inner-city living – get your slice today!

So it’s well known, buying properties within 10km of capital cities is generally a good investment, but where ARE the most affordable areas?

There’s some suburbs within 5km of capital city centres where the median unit price is $200,000 and the gross rental yield 5.33%?

You really don’t have to buy far from the city centre to pick up a bargain!

And it’s not a bad strategy for identifying best value properties to find ones located in affordable suburbs within a 10 kay radius of the city.

For some cities, this inner circle can be more or less, depending on the size of the city, however, generally it’s a good rule of thumb because it is these areas that are more than likely well serviced by transport, have social and retail amenities near by and benefit from strong rental demand.

Identified below are the five most affordable suburbs for houses and units within a 5km radius of Melbourne City.

Melbourne - houses

Melbourne - units

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Good opportunity to snap up a bargain

Claire Heaney from the herald sun has written an interesting article about whether the hesitation from property investors is leading to bargains in the market. From the article:

NERVOUS property investors are waiting for prices to stop falling before returning to the market, according to property research company RP Data.

But this hesitation is creating bargains for fast-acting first-home buyers who are willing to take a bet that prices are at or close to their lowest point.

“This is good news for first-home buyers, because fewer investors mean less competition,” RP Data’s national research director Tim Lawless says. “These two segments of the market often compete for the same housing stock because of the low entry price and generally strong rental yields.”

Figures released this week show Melbourne homes are now at their most affordable in five years for first-home buyers. Falling interest rates, higher first-home buyer grants and falling property prices have cut the amount of income needed to service a mortgage.

Read the full article here: http://www.news.com.au/heraldsun/story/0,21985,25074653-5013926,00.html

Is this the right time to trade up your property?

Good article about whether its a good time to buy into the hard hit top end of the market, from the article:

There are plenty of losers in the falling market, but the big winners will be those able to pounce on a cut-price premium property.

Though the downturn is being played out differently from suburb to suburb, it’s clear the properties at the top end of the market are being hardest hit. Exclusive suburbs such as Balwyn have seen as much as 21 per cent sliced from their median prices in the year to December last year.

The houses in the $500,000 to $600,000 bracket haven’t been as hard hit and some may have dropped only 10 per cent.

They are also expected to rebound quicker.

Read the full article here: http://www.news.com.au/heraldsun/story/0,21985,25074641-5013926,00.html

Mark Forytarz

PLUNGING interest rates are reviving Melbourne’s property market

Interesting article by Ben Butler and Ben Packham over at http://www.news.com.au/heraldsun/story/0,21985,25091470-5013926,00.html about

From the article:

The Reserve Bank has cut rates five times since August, slashing the official rate from 7 per cent to 3.25 per cent.

While those who fixed their home loan at last year’s higher rates have seen no relief, falling home loan rates have helped contribute to a clearance rate of 77 per cent this weekend.

Fixed or variable home loans - which is better?

Another interesting artcile from Bankwest over at realestate.com.au (Full article here: http://www.realestate.com.au/doc/review/feb09-1/bankwest.htm?rsf=newsletter_rea), below is an extract:

Almost every industry expert has a different view. Some senior economists are forecasting further large falls in the RBA cash rate whilst others say we’re nearing the bottom of the cycle.  To the ordinary borrower, it can all be very confusing.

Of course, the reasons for choosing a fixed rate mortgage as opposed to a variable product may differ based on individual circumstances.

For first homeowners who are on a tight budget, a fixed rate mortgage is a great way to lock in a rate and know exactly what the payments will be for a few years while they are settling into their home. Fixed rates may be slightly higher than a variable option, but if knowing the rate is locked in helps borrowers sleep at night, it can be a great option.

On the other hand, a mortgage product with a variable rate may provide greater flexibility for homeowners looking at selling their property or who are looking to pay off their mortgage faster with extra repayments.

So what are the main things to be aware of?

A fixed rate loan may be costly to leave early

The majority of fixed rate loans will charge a break cost that is based upon the economic cost to the lender of reversing the funding they have locked away for the life of the loan. So if you anticipate paying out the loan early, a variable rate option may be more appropriate.

Do you want to pay off more than the required repayments?

Most fixed rate loans limit any additional repayments to a specific amount each year (eg. $5,000) and if you put more into the account, the lender could pass on any costs.

Read the fine print

Variable rate loans can offer more flexibility when paying the loan back early, but this could incur high exit fees with many ‘introductory’ rate loans. It’s important to understand the terms and conditions of the product that you’re applying for.

Ultimately, you should work out what’s more important to you; the knowledge of exactly what your repayments are with a fixed rate, or the flexibility to repay the loan early that comes with a variable rate.

If you want the best of both worlds, most lenders will allow you to ‘split’ your loan.

For example, you could have $200,000 as a variable rate loan and $200,000 on a fixed rate loan.  This can be a great option as you are protected against rate movements on one side, yet you retain the ability to put extra funds (such as a tax refund) into the variable portion. It also means you’ll be charged a lower break cost on the fixed portion if you need to pay out the loan within the fixed rate term.

Looking ahead, it seems that we may be in for several more rate cuts as variable and fixed rates continue to fall. But how far is anyone’s guess. If you’re comfortable that you can afford the repayments on your mortgage, the question of whether to fix or not comes down to what is most suitable to your individual circumstances. That means weighing up your plans for the next few years against any savings you might pick up from renegotiating your loans.