A slowing in the decline of house prices and growth in rental returns have buoyed industry confidence in the property sector, a survey finds.

Industry expectations of house price changes and rental growth have strengthened after two quarters of falls, according to the NAB’s Residential Property Index - a survey of 270 estate agents, property developers, asset/fund managers, owners and investors.

Although conditions improved in all states, there was considerable variation in state performance with sentiment still weakest in Victoria and Queensland and strongest in NSW and WA, NAB’s survey found.

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The survey results follow the release today of the Australian Bureau of Statistics capital city house price figures which show a decrease of 1 per cent in the December quarter.

According to the ABS house prices fell in all cities, apart from Perth, Hobart and Canberra, for the three months to the end of 2011.

Sydney’s prices fell 1 per cent, Melbourne’s 1.6, Brisbane’s 1.3, Adelaide’s 1.6 and Darwin’s 1.4 per cent, the ABS figures show.

Perth’s prices were up 0.5, Hobart’s 0.8 and Canberra’s 0.7, according to the ABS.

The results differ from other figures released yesterday by property analysts RP Data which show falls in all capital cities apart from Sydney for the same period.

Australia's year-long decline in house prices may be levelling out, the RP Data figures show.

Capital city home values fell in every quarter last year but the rate of decline was slowing, it said.

According to the NAB survey, house prices were forecast to fall by just 0.4 per cent over the next year and modest growth was expected to resume in NSW.

‘‘Rental growth is accelerating and forward expectations have been revised up,’’ it said.

‘‘NAB believes these expectations may be a touch pessimistic. A structural shortage of housing remains,  commencements are still weak, interest rates are falling and the unemployment rate is still comparatively low,’’ it said.

Simon Johanson

February 1, 2012 - 12:03PM

Source: The Age

THE average Australian superannuation fund lost money in 2011 due to the sharemarket's poor performance, with analysts expecting a 2 per cent decrease in median ''balanced'' funds.

Conservative funds and cash funds - which allocate money to defensive assets such as fixed interest and bonds, where returns are normally lower - outperformed high-growth funds.

Paul Saliba, chief investment officer at wealth management firm Lachlan Partners, expects the outlook for 2012 to be similar to last year, with low-risk assets outperforming the sharemarket because of the risks facing the global economy.

''There is a clear risk for equity returns in a world of weak economic growth, deleveraging of both consumers and governments worldwide,'' he said.

The debt crisis in Europe was a ''dire risk'', he said, and ''unless something changes - and on all reports it's hard to see how it can change with any speed - then investors are going to be gun shy''.

While government bonds were the biggest gainers last year, Mr Saliba said corporate bonds should do well this year as people realised that ''companies are not going to fail en masse''.

According to superannuation research and consultancy firm Chant West, the negative super returns of 2011 compared with positive returns of 4.7 per cent in 2010 and 15 per cent in 2009, but were far better than losses of 21.5 per cent during the late-2008 global financial crisis.

''We can say overall the median growth [category] has only lost 2 per cent and that is because growth funds are well diversified across a number of growth and defensive asset classes,'' research manager Mano Mohankumar said.

''Our [average] conservative fund would have actually had a positive return for the year of 3 per cent. The main reason for that is that they have a higher weighting to bonds, which were the strongest-performing asset class of the year.''

Conservative funds had only about 20 per cent of assets exposed to shares, which were considered high-risk assets, he said.

Salvador Saiz, investment research manager at SuperRatings, expects the sharemarket tide to turn this year.

''Markets in December finally directed their attention towards the continued stream of positive economic data from the US,'' he said. ''To date, much of the better than expected news on US corporate earnings and GDP growth had been overshadowed by events in Europe.

''While we don't expect markets to shoot the lights out in 2012 - and members should moderate their expectations on returns - improving sentiment could be a positive catalyst in 2012.''

Most Australians have their super invested in the default ''balanced'' funds because they have not selected an alternative. These funds usually have 61 to 80 per cent of assets exposed to high-growth assets such as shares.

Lucy Battersby

January 19, 2012

Delayed retirement may be the answer

More super means a better retirement and better quality of life, FSC chief John Brogden says.

Financial planners should encourage clients to hold off on their retirement in order to save more superannuation, the Financial Service Council (FSC) said following its research into discrimination against older workers.

"Planners [should be] encouraging their clients to continue to work until a later age, whether it's full time or part time, to help them build their superannuation," FSC chief executive officer John Brogden told InvestorDaily.

"The reality is, the more super you retire on, the better your retirement will be, and your quality of life.
"The federal government has announced now that you will be able to continue to work to accumulate super into older age. Originally there was an age limit [which] has been demolished. So there are many remaining tax incentives to working. People are living longer so the more they save for their retirement, the better their retirement will be."

New research by Westfield Wright for the FSC highlighted a key concern among older workers that they would not be able to save a suitable amount of superannuation before they reached retirement. 

Around half of people over 50 said they were dissatisfied with the savings they had put aside for retirement.

The research showed 28 per cent of older workers had experienced discrimination, most commonly by being made redundant before others. Other examples included lack of training and development, verbal abuse and inflexibility towards health and physical needs.

Discrimination was most acute among mid-managers earning the average Australian wage of $70,000 per year, the report found.

Cost cutting and workplace culture were the most common reasons cited for the decision to recruit younger staff.

Older workers were concerned that they would not save a suitable amount of superannuation before reaching retirement.

"At current trends, by 2050 there will only be 2.7 working Australians for every citizen over 65. Without action, this will have serious implications for the quality of life of every Australian," Brogden said. 

"We need to end the concept of full-time work followed by full-time retirement. Australians remaining in the workforce for longer periods will stretch retirement incomes by supplementing superannuation through part-time work as well as reduce our nation's skills shortage. 

"However the solution is not a new raft of anti-discrimination laws. Instead, the focus should be on more flexible work practices and finding other paths of employment such as consulting or mentoring to encourage further workforce participation by older workers."

The study found those companies that did make the effort to engage and retain older workers were able to ease their skills shortages and found older employees to be 'easier to manage' and a 'safe pair of hands', he said. 

"Older workers also need to be flexible and recognise they cannot have it all - the flexible work hours and slower paced job on the same salary as they earned before is unrealistic," Brogden added.

By Samantha Hodge
Mon 30 Jan 2012

Source: InvestorDaily.com.au

The economic news from Europe in recent days has not been good. And it could get worse as the year progresses. Those guys have big problems. But let's not spook ourselves by imagining it to be any worse than it is.

Unfortunately, there has been a tendency in parts of the media to convey an exaggerated impression of how bad things are and of the extent to which Europe's problems translate into problems for us.

Take last week's downwardly revised forecast for the world economy this year from the International Monetary Fund. We heard a lot about the fund's dire warnings of what could happen if the Europeans did not get their act together, but what was not made clear was that the fund's actual forecast was for global recession to be avoided.

Though the growth forecast in the world economy this year was cut significantly from the forecast in September, at 3.3 per cent it is below the long-run average of about 4 per cent, but still comfortably above the 2 per cent level generally regarded as representing a world recession.

On the day, no one thought it necessary to tell us - even though the Treasurer, Wayne Swan, reminded journalists of it at his press conference - that, from our perspective, the fund's revisions were old news. They were surprisingly similar to the revised forecasts the government adopted in its midyear budget review last November.

The fund has the United States growing by 1.8 per cent this year; Treasury had it at 2 per cent. The fund has the euro area contracting by 0.5 per cent; Treasury had it contracting by 0.25 per cent. For China, the fund has growth of 8.2 per cent, whereas Treasury had 8.25 per cent. For India, it is the fund's 7 per cent versus Treasury's 6.5 per cent.

Bottom line? The fund has the world growing by 3.3 per cent, while Treasury had it at 3.5 per cent.

Journalists are always criticising politicians for repeatedly re-announcing new spending programs, thus leaving the public with an inflated impression of how much is being spent. But journos are not above doing much the same thing.

We get a fuss when the government revises down its forecasts in November, then another fuss when the fund announces essentially the same revisions. And in between we get a fuss when the World Bank announces its revisions. Three for the price of one.

Actually, you can understand why the uninitiated got excited about the bank's revisions. While Treasury had forecast world growth of 3.5 per cent, the bank revised its forecast down to just 2.5 per cent. But no one remarked on that, just as they did not seem to notice when, only a week later, the fund put its prediction at a seemingly healthier 3.3 per cent.

So which one is right? They all are. That is to say, they are all saying the same thing. I find it hard to understand how anyone who knew their business could bang on about how low the bank's forecast was without pointing out that it does its forecasts on a different and inferior basis to everyone else. Whereas our Reserve Bank and Treasury, and the fund, add each country's gross domestic product together using exchange rates that take account of the US dollar's widely differing purchasing power in each country, the World Bank does not bother. It uses market exchange rates.

So it perpetually understates the rate of growth in the emerging economies of Asia, thereby understating world growth, since most of it has for quite some years come from Asia. But not to worry. If you took the fund's country-by-country forecasts and added them together the same lazy way the bank does, what would you get? Growth of 2.5 per cent. Same forecast on either basis.

The trouble with all these forecasts and pronouncements from international agencies is it's hard for the public to assess what they amount to by the time they reach our shores. These pronouncements rarely mention Australia. And shock waves from Europe have to come to us via China, India and the rest of Asia.

I think the media could try harder to bridge this gap rather than leaving us with the vague impression disaster for Europe means disaster for Australia. Actually, what matters for us is not world growth so much as the growth in our main trading partners, with each partner's contribution weighted according to its share of our exports.

When Treasury did this sum in the midyear review, growth in the world economy of 3.5 per cent translated to growth in our main trading partners of 4.25 per cent. All this despite Europe's recession.

Fran Kelly of Radio National Breakfast did go to the trouble of asking the lead author of the fund's World Economic Outlook, Jorg Decressin, what the revised forecasts meant for us. His reply deflated most of the hype we have been subjected to.

''Australia will be affected by these downgrades only to a limited extent,'' he said. Oh. ''At this stage, growth in output for Australia is still reasonably strong.

''Growth in Australia is importantly driven by major investment projects that are in the pipeline and these are funded by strong multinationals that don't have problems assessing funding.'' Oh.

''There is no advanced economy - or maybe there are one or two - that is as well placed as Australia in order to combat a deeper slowdown, were such a slowdown to materialise, and that's because, well, you still have room to cut interest rates if that was necessary and you also have a very strong fiscal [budgetary] position.''

Do you get the feeling you have heard all this before? Maybe it's true.

Ross Gittins is the economics editor.

January 30, 2012

Source: The Age

The number of home loans approved in November has beaten market expectations and the prospects for 2012 look good, economists say.

The Australian Bureau of Statistics (ABS) said today the number of mortgages approved in November rose 1.4 per cent to 46,953.

Macquarie senior economist Brian Redican said the data was encouraging.

"Definitely, we are seeing a step in the right direction," he said.

Mr Redican said the housing sector might receive a boost from the two successive interest rate cuts by the Reserve Bank of Australia (RBA) late last year, and the prospect of more cuts to come in 2012.

"I think it does have to have a positive impact.

"These numbers don't reflect those cuts yet and it will have to take a few more months for that to flow through.

"What it does do is just make housing more affordable for those people that were thinking of going into the housing market."

The ABS also reported that total housing finance by value rose 2.1 per cent in November, seasonally adjusted, to $20.344 billion.

Westpac senior currency strategist Sean Callow said the November home loan approvals data usually don't surprise because banks already have good information on that month.

He added it was too early to see the market's reaction to the November interest rate cut.

"If you were thinking about taking out a new loan on the rate cut you wouldn't do so until the rate actually fell," he said.

"Australian housing finance is very close to expectations.

"By state, NSW remains an outperformer, plus 4.2 per cent, though perhaps flattered by approvals being brought forward ahead of the January 1 increase in state stamp duty.

"New South Wales had a horror start to the year but it's risen every month since then.

"Oversupply seems to be hurting Victoria, minus 0.2 per cent for a third consecutive decline.

"Queensland remains sluggish, up 0.9 per cent, only after two declines while WA held up with a 0.9 per cent gain."

Mr Callow said the result was OK in national terms.

St George chief economist Besa Deda said the data showed that conditions in the housing sector were slowly improving.

She said that while November's interest rate cut may have helped boost the figures, housing finance numbers had been rising since April 2011.

"I think the rate cut would have helped, but I don't think you can say it is entirely due to that," she said.
Ms Deda said a rise in the number of first-home buyers was also good news and would help stabilise house prices in 2012.

"That's also a positive element because it means that it is helping improve the liquidity in the market.

"We think it will help in the stabilisation of house prices in the first half of this year and that a modest improvement in house prices will come next year."

First-home buyers accounted for 20 per cent of total owner-occupied housing commitments for November, up from 19.1 per cent for the previous month.

Ms Deda said she did not expect the figures to weigh heavily on the RBA board when it meets in February to decide whether or not to deliver another interest rate cut.

"I think they would have largely expected this trend to continue improving," she said.

"It's European developments and more general global developments which are top of mind for the RBA."

January 16, 2012 1:08pm

Source: AAP

After a slow 2011 and with prices on hold - or dropping - it could be the year to act.

Property experts universally declare that 2011, with its flat-to-falling market and low auction clearance rates, was a tough year. And they predict little change for the next 12 months.

The Real Estate Institute of Victoria's Robert Larocca says: ''When you look back on the year, I just think that it's apparent how important and how directly linked the state of the property market is to the state of the economy … I don't think you can expect to see the property market have a year of strength if people were not confident in their economic prospects.''

Even the impact of lower interest rates was muted because of the economic conditions that prompted the rate cut, he says.

Unless the economic situation changes dramatically, Mr Larocca says prices overall are expected to increase by only a couple of percentage points towards the end of this year. ''But we hope that the impact of the two rate cuts we've seen so far, and hopefully another one next year, will encourage just enough people back into the market to improve circumstances a bit.''

Renters are the big winners from the current market and should find their search for accommodation easier, with the vacancy rate rising to more than 3 per cent in October for the first time since 2006, he says.

''The circumstances over the last few years have really been much tighter than we would have otherwise liked to see [for renters]. Hopefully it is going to be a bit easier for them in the next few years.''

Buyer's advocate Peter Rogozik says most Melbourne properties underwent a price ''correction'' last year. ''The total number of transactions were down,'' he says. ''In 2010, there were around 51,000 transactions. In 2011, there were around 41,000. Certainly, selling agents and buyer's advocates had a really, really tough year.''

Despite that, quality properties, which he estimates make up less than 5 per cent of the market, hold their own. Properties within two and 10 kilometres of the Melbourne city centre with high-quality streetscapes and scarce or unique features still managed to attract multiple bidders to auctions, he says.

Mr Rogozik believes the market bottomed out in October and is starting to recover. His tip for the new year is to consider buying an apartment. ''Apartments give the opportunity of entering the market at an affordable price in a traditional blue-chip suburb, such as South Yarra.''

His second piece of advice is to buy in an area adjacent to a recognised blue-chip suburb, such as Brunswick East's neighbour Coburg, or Kingsville, bordering Yarraville. ''These suburbs have the same characteristics as traditional blue-chip suburbs without the price tag.''

Mr Rogozik says 2012 will present investors with a ''final window of opportunity'' to enter the market, before a substantial price increase within a short time, as happened in 2009. ''My advice to investors who have been sitting around, and I know they are out there, is that they should make their move in 2012, otherwise they will be disappointed when they hear the market is spiralling upwards very quickly,'' he says.

Peter Hay, managing director of Hay Property Consultants, says: ''I think, overall, it was a pretty tough year. I think good properties sold well and held their value but anything that wasn't unique has taken a bit of a battering. Vendors have had to adjust their asking prices down to meet the market and, as the year unfolded, it became a buyers' market.''

Mr Hay disagrees that the market has bottomed out. ''I think it's still going, unfortunately. I think it will continue in 2012 and I think that it will be a good buyers' market, for both first and second-home buyers, particularly first home buyers, because builders are starting to hurt.

''House and land packages just aren't selling at the moment; vacant land in new estates is not selling. People are just sitting on the fence waiting to see what happens. There is a lot of uncertainty out there and I think we have probably got a bit more to come.

''Interest rates don't seem to be making much impact and the trouble is that the banks don't pass them on, so people have got no confidence at all to go out and borrow more money to upgrade, or jump in for the first time.''

Mr Hay says he can't see much that is likely to change the situation any time soon. ''Job security is probably the highest thing on the agenda and, when job security is not there and there is no real wages growth, we are seeing that people are just sitting on the fence. I don't think there will be any improvement until the end of next year.''

His advice for investors is to look for property adjacent to areas where councils have developed precinct plans that promote medium-density developments. Coburg, Dandenong and Frankston have been implementing their precinct plans; buying next to the revitalised areas will enable investors and home owners to benefit from the increased amenities, Mr Hay says.

''You study the precinct plans and look at where they are re-zoning property and allowing medium-density usage. That's the key - study the plan.''

For those with a less financially oriented agenda, Mr Hay says now is a great time to pick up a holiday house.

''If you are looking for a holiday property, have a look at the Mornington Peninsula because that has taken quite a hit over the past 12 to 18 months, or probably two years. And there is some very good affordable property. You can even buy views now for under $700,000.''

Experts' word on 2012

■No big price increases

■Rental situation to improve

■Good time to invest

■Holiday homes affordable

■Target areas with precinct plans

■Apartments a good buy

Kate Robertson

January 14, 2012

Source: The Age

AUSTRALIAN housing markets displayed a generally resilient performance in 2011, reflecting the inherent security of residential real estate in this country, particularly when compared with housing markets in similar open-market economies.

The year was always set to be a period of correction for Australia's housing markets following the unsustainable growth in house prices recorded through 2009 and 2010.

Between January 2009 and June 2010, Melbourne's quarterly median house price rose by nearly 30 per cent, with Sydney's up by almost 20 per cent over the same period. All other capitals also recorded big rises in house prices over those 18 months.

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Housing affordability crashed by the end of 2010, with surging house prices and rising interest rates combining to send buyers into hibernation.

Australian Property Monitors data has revealed that capital city housing markets have generally performed encouragingly in 2011 despite the pressure on housing affordability generated in 2010 and a mixed economic performance in 2011.

The national median price for houses over the year to October 2011 fell by just 1 per cent compared with the previous year, with median unit prices rising by 1.2 per cent over the year. The 2011 result follows a 17 per cent rise in the national median house price over the year to October 2010 and a 12.2 per cent rise in the median unit price over the same period.

The best capital city performers were Melbourne and Sydney, where annual median house prices rose by 1 per cent. Darwin and Adelaide house prices were flat and Hobart down 1.5 per cent.

The worst performers over the year were Brisbane and Perth, where annual median house prices fell by 3.5 and 4.75 per cent respectively.

The unit market clearly outperformed the housing market over the year to October 2011, with Sydney recording median unit price growth of 2 per cent followed by Melbourne and Darwin up by 1 per cent. Brisbane and Perth were again the underperformers, with annual unit prices falling by 1.3 per cent and 3.5 per cent respectively.

Bureau of Statistics data confirms the solid performance by Australian housing markets in 2011, with the number of owner-occupier housing loans rising by 2.4 per cent over the 10 months ending October compared with the same period in 2010.

New South Wales was the best performer with an increase of 8 per cent, with Western Australia surprisingly in second place with growth in home loans of 7 per cent over the year, courtesy of a surge in the past three months - indicating perhaps growing late-year momentum in that market.

By contrast, the number of home loans approved in Queensland in the year to October fell by 8.4 per cent compared with the same period in 2010.

The nature and strength of Australian housing markets in 2011 was always to be determined by the underlying supply and demand characteristics of individual markets and the strength of national and local economies.

In addition to the affordability barriers created by the prices surge and interest rate rises of 2009 and 2010, housing markets have had to encounter unexpected headwinds in 2011. The impact of the central Queensland and Brisbane floods was not restricted to the local housing markets. National economic output was affected through reduced coal exports and the cost of the reconstruction levy. Higher prices for fruit and vegetables also affected household budgets nationally.

The impact of catastrophic natural disasters on the national psyche and confidence cannot be underestimated, particularly given Australia's recent propensity for financial conservatism, especially when it comes to buying or borrowing.

The Japanese earthquake and associated tsunami in March also contributed to lower economic growth and reduced consumer confidence.

Stalling economic growth in 2011 was also a product of continued mixed performances by various industry sectors, particularly retail, manufacturing, tourism and construction. As a consequence, all capitals recorded rises in unemployment through mid-year. All these factors combined to subdue consumer capacity and confidence and consequently dampen home buying activity through 2011.

Most Australian capital city housing markets are, however, set to record growth in median prices over 2012 as the national economy gathers strength. The Australian economy is primed to expand strongly on the back of a significant resources boom with the Organisation for Economic Cooperation and Development predicting gross domestic product will increase by 4 per cent over the year.

Melbourne, Adelaide and Hobart will be the underperformers in 2012, with median house price growth of between zero and 5 per cent. Melbourne's balanced housing supply and demand mix offers buyers a wide choice and it remains the most tenant-friendly capital city rental market. Affordability barriers, however, remain for home buyers.

With the Victorian economy showing signs of running out of puff, particularly as the recent construction boom abates, the housing market is set to drift sideways though 2012. The possibility remains of some growth in median house prices by the end of 2012 as the impact of a strong national economy filters through.

Dr. Andrew Wilson - senior economist for Australian Property Monitors.

December 31, 2011

Source: BusinessDay

The number of home loans rose in November, buoyed by the Reserve Bank’s Melbourne Cup Day interest rate cut.

Home loans rose 1.4 per cent in November after rising 0.8 per cent in October, according to the Australian Bureau of Statistics. Economists had been expecting a 1 per cent gain in November.

Investment lending rose 1.8 per cent in November, after a 5 per cent fall in October.

Two consecutive interest rate cuts by the Reserve Bank, starting in November, may have contributed to stabilising the housing market, which was in the doldrums through most of 2011.

But the household sector’s renewed tendency to pay down debt and avoid sizeable borrowings is expected to cap activity in the housing market, creating headwinds for new lending, home prices and construction activity.

Cash-rate futures indicate a 64 per cent chance the RBA will cut rates when it meets again on February 7, down from 100 per cent late December. Markets are still tipping the RBA's key cash rate will fall to 3.25 per cent by September, as the central bank adjusts the cash rate in response to slower growth and higher uncertainty. The cash rate is currently at 4.25 per cent.

HSBC chief economist Paul Bloxham said the RBA's interest rates cuts were supporting the housing market after a period of weakness.

"I think we're seeing some very early signs of stabilisation in the housing market," said Mr Bloxham. "Another sign is the house prices data for November - it's begun to level out as well."

Capital city home prices rose 0.1 per cent in November, but still posted a 3.5 per cent drop in the 11 months to that period, according to RP Data.

"Australia has some potent policy tools and one of those is the RBA's cash rate," said Mr Bloxham.

He didn't expect households' current preference to pay down debt to have a dampening effect on borrowing.

"I think we've already seen households move some way down that path," said Mr Bloxham. "We're starting to see the impact of the RBA's handiwork on the economy.

"I think the monetary transmission mechanism will work much as it does in the past," he said.

Home loans for owner occupied properties rose 4.2 per cent in New South Wales but slipped 0.2 per cent in Victoria. In Queensland they increased 0.9 per cent in the month, matching Western Australia's gain.

In South Australia they fell 0.3 per cent, while in the Northern Territory they fell 0.6 per cent. In Tasmania they rose 3.9 per cent, in the month.

Chris Zappone

January 16, 2012 - 11:44AM

Source: The Age