Capital City Market Analysis

Houses
Area	Median Value	Growth				Rent			Sales			Predictions
		20 Years % p.a.	Year Ending Apr 2011	Last Quarter	Last Month	Rate, Month Ending Apr 11	Amount, Month Ending Apr 11	Year Change	Year Ending Apr 11	Year Ending Apr 10	Year Change	5 year, %p.a.	8 year, %p.a.
ACT	$533,500	7.43%	4.09%	0.48%	-0.77%	4.69%	$480	6.67%	4,980	4,986	-0.12%	0.88%	2.06%
Adelaide	$406,000	NULL	-0.02%	-1.02%	-0.68%	4.31%	$335	4.69%	20,497	20,024	2.36%	-0.10%	1.27%
SA Country	$270,000	NULL	4.15%	3.72%	1.66%	4.83%	$250	4.17%	8,594	7,384	16.39%	-0.71%	0.77%
Brisbane	$442,500	7.00%	-4.64%	-2.11%	-1.13%	4.48%	$380	1.33%	33,351	40,528	-17.71%	4.93%	4.79%
QLD Country	$370,000	6.59%	-2.70%	-2.09%	-0.63%	5.22%	$370	2.78%	33,430	37,773	-11.50%	4.59%	4.38%
Darwin	$506,500	NULL	-1.39%	-2.21%	-0.25%	5.25%	$510	-3.77%	1,174	1,793	-34.52%	5.38%	5.89%
Northern Territory	$471,500	NULL	-0.56%	-2.26%	-0.75%	5.53%	$500	0.00%	1,730	2,503	-30.88%	4.41%	5.57%
Hobart	$380,500	NULL	1.93%	0.20%	-2.20%	4.80%	$350	2.94%	2,107	2,301	-8.43%	5.20%	NULL
TAS Country	$266,000	NULL	-2.60%	-3.15%	-2.35%	5.10%	$260	4.00%	4,194	4,346	-3.50%	5.40%	NULL
Melbourne	$599,500	7.85%	3.22%	1.02%	-0.20%	3.31%	$380	2.70%	51,293	43,898	16.85%	2.54%	3.80%
VIC Country	$333,500	6.61%	8.19%	4.45%	1.81%	4.69%	$300	7.14%	42,835	41,317	3.67%	1.48%	3.65%
Perth	$481,500	9.02%	-0.43%	0.23%	-0.82%	4.12%	$380	0.00%	21,335	26,523	-19.56%	6.58%	6.14%
WA Country	$349,000	8.36%	-3.92%	-1.84%	-1.50%	4.94%	$330	6.45%	4,964	6,231	-20.33%	7.18%	6.88%
Sydney	$667,500	6.86%	2.52%	-0.58%	-0.32%	4.06%	$520	4.00%	38,614	45,053	-14.29%	4.76%	5.67%
NSW Country	$341,000	6.73%	1.81%	-0.15%	-0.79%	5.20%	$340	9.68%	36,750	46,851	-21.56%	4.24%	5.87%
Australia	$443,500	NULL	1.77%	1.02%	0.44%	4.35%	$370	2.78%	304,674	329,718	-7.60%	3.95%	NULL

• You will note from the above that there was no city in Australia where housing values advanced in the month of April. In fact, there were only two markets that presented growth – SA Country and Victoria Country.
• The magnitude of the corrections was not extreme and is not a cause for alarm at this stage. However, it is very unusual to see the total market in a correction phase and it points to a recent event that has unsettled the market. In a situation like this, given other weak economic indicators, considerable care will need to be exercised by the Reserve Bank in regards to interest rates until the market regains some level of confidence. To me, this points to a situation where any upward movement in interest rates is unlikely in the short term.
• Hobart suffered most in April, with a reduction in market value of 2.2 per cent. However, we should note that this is a very small market and, as a consequence, it will be more susceptible to adjustment than others.
• Sales volumes are declining and the highest reduction in percentage sales was in Darwin. Again, this is a small market so small adjustments by numbers can distort the percentage picture.
• Melbourne, while starting to adjust, is still presenting relatively strongly in terms of sales volumes. For the year, sales activity is still in positive territory.
• In all areas of Australia other than in Darwin, which presents the highest rental yield in Australia, weekly housing rentals are increasing.
• Our calculations indicate Melbourne has the potential to have surplus housing stock. This is evidencing itself in the weekly rental position, which is providing the lowest rental yield in Australia.
• Adelaide and to a lesser extent Canberra, on our numbers, have a surplus stock position and the predictions are reflecting such a situation. It is presenting as if these markets are likely to be more stagnant over the next five years than any others in Australia.
• Melbourne is yet to enter a correction phase based on the predictions so care in this market needs to be exercised.
• All other housing markets will be approaching a turning point or will have passed the bottom of the cycle. While there may be a few more months of slight correction these markets are worth watching for buying opportunities.  

Units
Area	Median Value	Growth				Rent			Sales			Predictions
		20 Years % p.a.	Year Ending Apr 2011	Last Quarter	Last Month	Rate, Month Ending Apr 11	Amount, Month Ending Apr 11	Year Change	Year Ending Apr 11	Year Ending Apr 10	Year Change	5 year, %p.a.	8 year, %p.a.
ACT	$429,000	7.68%	4.13%	0.79%	2.54%	5.26%	$435	6.10%	2,856	3,083	-7.36%	-0.59%	0.93%
Adelaide	$319,500	NULL	2.21%	1.22%	0.24%	4.66%	$285	5.56%	4,966	5,466	-9.15%	-0.97%	0.61%
SA Country	$235,500	NULL	3.32%	-0.94%	0.26%	4.38%	$200	11.11%	552	606	-8.91%	-1.59%	0.11%
Brisbane	$364,000	6.26%	-1.13%	-0.62%	0.62%	5.09%	$355	1.43%	11,974	14,295	-16.24%	1.21%	2.10%
QLD Country	$327,000	5.52%	-6.39%	-1.65%	-0.52%	5.02%	$315	5.00%	12,735	16,556	-23.08%	2.30%	1.94%
Darwin	$402,500	NULL	-1.51%	-3.64%	-1.70%	5.51%	$425	-1.16%	835	1,224	-31.78%	4.06%	5.17%
Northern Territory	$395,000	NULL	1.55%	-2.32%	-0.48%	5.28%	$400	-4.76%	1,055	1,531	-31.09%	3.16%	4.94%
Hobart	$284,000	NULL	0.44%	-0.96%	0.89%	4.96%	$270	3.85%	858	765	12.16%	4.67%	NULL
TAS Country	$218,000	NULL	1.16%	-1.76%	1.88%	5.02%	$210	5.00%	791	611	29.46%	4.04%	NULL
Melbourne	$457,000	7.54%	2.66%	1.56%	0.06%	4.00%	$350	0.00%	30,396	29,639	2.55%	3.20%	4.69%
VIC Country	$262,500	6.14%	6.32%	0.37%	1.56%	4.97%	$250	8.70%	6,821	7,261	-6.06%	0.66%	2.82%
Perth	$389,500	7.58%	-4.42%	-2.92%	-0.94%	4.82%	$360	0.00%	5,100	6,355	-19.75%	0.71%	1.78%
WA Country	$298,000	6.34%	-6.21%	-0.86%	-0.50%	5.21%	$300	3.45%	463	557	-16.88%	1.80%	1.62%
Sydney	$483,000	6.25%	5.25%	1.77%	0.68%	4.86%	$450	4.65%	40,312	48,483	-16.85%	2.15%	4.10%
NSW Country	$303,500	5.40%	0.85%	-0.08%	-0.99%	4.82%	$280	7.69%	11,137	13,143	-15.26%	0.47%	4.13%
Australia	$402,000	NULL	2.84%	1.76%	0.01%	4.61%	$355	1.43%	130,016	148,351	-12.36%	2.33%	NULL

• Affordability issues will make this market less susceptible to adjustment. That is, it is likely that there will be a higher level of demand.
• Capital price affordability and investor activity will be helping the demand level and making this market less susceptible to price adjustment.
• The growth for the last three months across Australia was a respectable 1.76 per cent, however it was all but zero for the month of April.
• Weekly rentals are increasing and rental yields are becoming respectable, with close to 5 per cent or a little more being the norm. This means that there will again be positively geared property investment opportunities in various parts of Australia.
• Our predictions are low as they are based on the history of units generally underperforming to houses. As a consequence, the unit predictions should be seen as a minimum guide only.

*Note: Courtesy of Residex.

It's a flat market but yields are on the up

Property values across the nation’s capital cities saw a flat month in March, according to recently released RP Data-Rismark Home Value Index results.

Capital city dwelling values fell by 0.2% in seasonally adjusted terms during the month of March, contributing to a negative quarterly seasonally adjusted growth rate of -2.1%.

March’s result was broadly in line with what has been a flat growth performance over the last 12 months across our capital cities of -0.6%.

RP Data research director Tim Lawless noted that the market won’t start to bounce back until the demand for property starts to match up to supply.

“Clearance rates are bouncing around the low 50% mark each week, the number of homes being advertised for sale is almost 30% higher than at the same time last year,and sellers are being forced to adjust down their price expectations,” he said.

“Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.”

Sydney saw the best seasonally adjusted growth performance of the state capitals, with a quarterly fall of -1.1%, followed by Canberra (-1.3%), Hobart (-1.4%), Melbourne (-1.5%) and Adelaide (-1.6%).

A flood-ravaged Brisbane saw the biggest quarterly fall of -4.6%, followed by Perth (-3.4%) and Darwin (-2.5%).

“Unsurprisingly, the flooding that has occurred within South East Queensland has likely compounded Brisbane’s weak market conditions,” said Lawless. “Brisbane values are down 6.8% over the year to March 2011.”

The good news for investors is that the capital city rents have risen 4.6% over the last six months.

“In contrast to the fall in home values, gross rental yields have been improving, with apartments and houses now delivering a gross return of 4.9% and 4.2%, respectively, in March 2011 according to RP Data-Rismark’s estimates,” said Lawless.

The best yields can be found in Darwin, with houses averaging 5.4% and units 5.7%, which is closely followed by Hobart (5.4% for both houses and units), and by Brisbane (4.5% and 5.2%).

Source: Your Property Investment

Time to get tax wise!

Depreciation is one of the most important (yet often overlooked) tax saving benefits available to investment property owners. Just like you claim wear and tear on a car purchased for income producing purposes, you can also claim the depreciation of your investment property against your taxable income.

“It is surprising just how many investors are out there who really don’t fully understand depreciation and what allowances they can legally claim,” said Hyde. “The most common misconception is that only new property can be depreciated and this is simply not true.”

Say you own a 1970s house. According to Hyde, it is still worthwhile putting in a claim for depreciation because there is still value attached to the plant and equipment within the property. Items such as blinds, carpets and kitchen appliances are all deductible.

Other tax-wise tips:

• Don’t fall for cheap DIY depreciation options. Only accredited quantity surveyors are trained in estimating building costs. Incorrect measurements can lead to missed deductions and poor quality reports are more likely to attract an ATO audit. 

• If you are planning on renovating your property get a quantity surveyor in to assess the residual value of the items before you demolish so that you can claim that value as an outright deduction off your tax. 

• Run your property through Washington Brown’s free online calculator to estimate whether you could maximise your tax savings further.

• If you haven’t been claiming or maximising your deductions you can backdate tax returns but talk with your accountant or tax advisor

“It’s important for investors to understand that depreciation isn’t about dodging or underpaying taxes,” said Hyde. “It’s simply about getting every last cent of depreciation allowance that you are legally entitled to.” 

Source: ttp://www.yipmag.com.au