January housing market results 'unexpected'

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Residex founder, John Edwards, says he’d hoped to be able to report a strong start 2013 with a very positive newsletter about the January outcome in our housing markets – and he’s done just that.

The Brisbane house and land market was the best performer for the month of January, whith growth strong at 1.98%.

“If this were to continue each month throughout the coming year, the outcome to January 2014 would be an outstanding 26.5%. However, it is not rational to suggest this growth will continue at this rate for the balance of the year.”

Residex data indicates that there is a stock shortage in Queensland, however, Edwards says  research indicates people who desire a house and land package will not necessarily alter their preference when affordability issues present.

“They will instead put off a purchase and rent until they can afford what they want. They do not move to purchase the affordable alternative (a unit) easily. This seems to be a reasonable decision, as home purchasing is a very long process that generates financial risk and often hardship. Hence, the difficulties are generally only accepted when the person is happy that the property purchase meets their desires.”

Edwards says the most ‘disappointing’ result, surprisingly, is Perth.

“The quarterly growth rate was negative and it would appear that this market is reacting to the much publicised slowing in resource projects more quickly than expected.”

Melbourne, however, is reacting ‘as expected’.

“Residex estimates indicate that this market is in a surplus stock position (approximately 13,000 dwellings), which is most likely to be found in the unit market. It is reasonable to expect that this market will correct with this level of stock overhang…Investor activity is unlikely to assist this market as rental yields are the lowest in the nation at 3.9% for houses and 4.7% for units.”

Edwards says the Melbourne market is expected to hover around the zero growth position until the overhang has been absorbed and rental yields increase.

“Overall, housing markets did not perform as I expected in January, or how many industry commentators indicated. Interest rate adjustments are having some impact and can perhaps be said to be the cause of recent growth experienced in many markets. However, further interest rate adjustments will need to occur before markets present real growth on an Australia wide basis.”

He says the early announcement of the federal election date was bad news for the housing market, as it causes those who are more cautious to ‘sit on their hands’ and await the outcome.

“Given all of the above, markets that are currently showing the most promise are northern Australian markets and Sydney housing. I continue to recommend renovation opportunities in these markets. In the Sydney market, older style units will be under some price pressure and offer renovation opportunity.”

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