Residential Real Estate Prices

For anyone interested in selling or investing knowledge of residential prices is a must.

Residential markets in 2010 offer an abundance of opportunities.

We encourage prospective investors to consider these opportunities, and to, if possible, find a place for them in their long term strategy.

The Australia residential estate market has seen growth figures in excess of early on 2009 estimates. House prices are predicted to grow between five or six percent in 2010, despite sluggish economic conditions through late 2008 - early2009.

Australia’s house prices grew 6.2 percent to September 2009, while investor demand and upgrader demand increased in the last few months of 2009, after a short downward swing.

Housing Industry Association chief economist Harley Dale said Australia would experience significant growth in housing by up to 25 percent through to mid 2011. He also supports predictions of about five to six percent growth in established homes next year.

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Dale optimism is shared by most leading Australian analyst and is even foreshadowed the minuets of the Reserve Bank of Australia (RBA) for the September quarter of 2009.

Dale notes, “With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,”. Evidently, the property market offers informed investors and sellers much opportunity.

2010 is full of opportunities, as usually market trends don’t favour all investors. For investor with a high debt and low equity 2010 may not represent the best time to invest.

Houses prices may be lower but the market is not as stable as it was in say 2006, due to the global economic crisis.

Residential-realestate.com recommends 2011 or 2012 for investors who are eager to invest but are burdened by high debt levels.

Rising Residental Real Estate Prices

The Reserve Bank has warned Australia could face a resurgence of house price inflation, as construction lags and the economy recovers. As the RBA has identified this trend they will act on it by raising interest rates.

Prospective investors need to remain familiar with such predictions, regardless of the likelihood of them eventuating and associated risk.

In a speech to the Committee for Economic Development of Australia on Tuesday, the Reserve’s head of economic analysis, Tony Richards, said there was a risk of ”undesirably strong growth” in house prices unless construction caught up with a surge in demand.

Two successive stimulus packages from the Rudd government have been released to promote increased construction, and to bridge the gap between supply and demand.

”Six months ago the concern was we would see unhealthily large declines in asset prices, but clearly that threat has passed,” Dr Richards told the conference.?”When the price of housing rises, higher-income households tend to benefit at the expense of lower-income households.”

This is primarily because high income households are assets rich, often owning more than one house, and low income households are asset poor, usually one heavily indebted house.

Dr Richards said one reason for the housing shortfall was the difficulty and cost of developing land and that governments should do more to improve public transport and infrastructure, in order to encourage development.

If the government acts on the recommendations of Dr Richards this could see a rise in residential development nationwide.

Overvalued

Exactly how overvalued is Australian residential property?

There are two schools of thought. Property bulls will suggest that while prices appear high in historical and relative terms, the number of people moving to Australia exceeds the number of dwellings being constructed?—?supply and demand suggests that this will continue to put pressure on house prices. This view is supported by increasing rental yields.

The contrary opinion is that Australia is in the midst of a housing bubble in which prices bear absolutely no reflection of underlying economics.

The median price of a house in Sydney is $551,000, while the Melbourne median is above $450,000. According to the RBA, average weekly earnings for all employees are $45,729.

Therefore, the average house price in Sydney is 12 times earnings, and in Melbourne it is 9.8 times earnings. Sydney house prices are therefore almost double those of the allegedly overpriced UK in relative terms.

The key for Australian residential property, one investor argues, is employment. Not only is Australia virtually at full employment, but despite consumer confidence being down, few workers expect to lose their jobs. If that changes, our housing market could experience a very substantial correction.

Undervalued

Despite mostly high prices there are many cheap suburbs in our capital cities, and arguably some that are undervalued.

Cheap suburbs are usually valued poorly because of their low-quality housing, high concentration of industry or because they are located near undesirable sites

Undervalued suburbs are generally cheap, however have the potential to grow in price and offer potential investors a unique opportunity.

For those planning to sell in an undervalued area it is often better to wait as future price growth is possible.

Future price growth can be attributed to a number of factors: the gentrification of the area, public money spent in the area, private money spent in the area.