The market is moving to the position we foreshadowed many months ago and predicted as many as three plus years ago. That is, growth is slowing and rentals are again on the rise. This is as it should be, and in fact presents us with lower risk levels moving forward as the increases in rent rates will help to cover off interest rate rises when and if they occur.

Affordability is moderating our markets growth rate. There is much publicity about negative median numbers even though they are very small.

There can be little doubt that the interest rate increases implemented by the Reserve Bank have taken its toll on housing purchase activity, and the retail market generally. Further, it has reminded borrowers that certainty in the future is limited, and they need to save for a “rainy day”, which more people are now doing. While this is good, it is also a “Catch 22” situation where saving slows the economy and as this happens, it causes people to become even more uncertain so they spend less and save more.

On an Australia wide median value basis, I would be surprised if we are at the bottom of the adjustment phase. However, there will be markets that have passed the bottom of its adjustment cycle, or are very close to it. In particular, both Brisbane and Sydney markets do present as if they are about to, or have already, moved to an upward growth path. These two markets are, based on our numbers, the only two markets that are currently in housing shortage. It is these two markets that we should be focused on in the medium term. Perth is a little behind and should be watched for a movement which indicates it has passed its correction phase.

About John Edwards…

John Edwards is CEO of FindMeaHome.com.au and Residex, and is recognised as Australia’s leading property researcher.

Mark Taylor is the Founder and Director of Keys To Success Club.   A property investor in his own right, Mark helps other people succeed in property investment by connecting them to property experts through Keys To Success Club.

Mark Taylor is the Founder and Director of Keys To Success Club.   A property investor in his own right, Mark helps other people succeed in property investment by connecting them to property experts through Keys To Success Club.

Our resident numbers man has put together his summary of Australian Property Market Performance for 2010.

Not bad overall, despite the interest rate increases:

Link to Data

HOUSES:

• Melbourne was the best performer again, with a annual rate of growth of 9.2 per cent.
• The poorest performer was Brisbane, but in recent months the market looks as though it has bottomed out and from here we should see gradual movement to a growth phase. We do not believe the floods will have more than a transitory impact, and non-affected flood areas will see growth that may not have occurred had the floods not eventuated.
• Perth, while it did produce a negative number in growth for the quarter, appears to have seen the worst and while there may be some small adjustments to come, the worst appears to be over.
• Sydney houses are presenting the highest rate of rental growth at 13 per cent, and rental costs across the nation have generally increased. We expect that as a consequence of affordability, this trend will continue and rental increases in the current year are likely to be higher.
• Rental yields are at a point in many areas where positive gearing is again possible after tax.

UNITS

• The unit market in Sydney and Melbourne has outperformed its housing markets. In both cities, this will be a function of affordability and shortages of stock in well-located positions.
• The pressure on rentals in Melbourne is yet to manifest itself with rentals for the year showing little to no growth.
• There are now three capital cities where the median rental yield is in excess of 5 per cent. Sydney unit rental yields are approaching acceptability at 4.92 per cent, and it will be possible to locate units in areas of Sydney that will provide positive gearing after tax.
• Darwin remains the top performer in rental yield terms. Growth has been slowing and we may see more slight adjustments, but like other markets, it is presenting as if it is close to the bottom of its cycle.

About John Edwards…

 John Edwards is CEO of FindMeaHome.com.au and Residex, and is recognised as Australia’s leading property researcher.

Mark Taylor is the Founder and Director of Keys To Success Club.   A property investor in his own right, Mark helps other people succeed in property investment by connecting them to property experts through Keys To Success Club.