CEO of McGrath Estate Agents, John McGrath, a regular contributor to the online Switzer News (switzer.com.au) and Sky Business News commentating on Australia’s property market, had these comments about the shape of Australian Real Estate compared to the property market in other major countries worldwide.
“On a global scale, Australian real estate provides outstanding value compared to other major international locations. Here you can purchase a waterfront home on Sydney Harbour for under $10 million. In New York and London, and even holiday spots like The Hamptons on Long Island and the Côte d’Azur in the South of France, buyers will routinely pay three times as much.
Today, our property market provides a whole lot more than simply great value – it has also become arguably the safest and best performing residential market in the world.
While other major property markets have suffered significantly due to the GFC, Australian property values lost just 3.8% from peak to trough during the eye of the storm last year. This looks pretty rosy compared to losses of almost 25- 40% in the UK and US and 30-50% across Asia since the sub-prime drama began in 2007.
This year, our market is flying with better than expected gains of 7.9% across the board since January. In August alone, Australian property values rose by almost 2%, the largest monthly rise since the RP Data-Rismark National Home Value Index was launched in January 2005. Melbourne is the stand-out at 11.6%, followed by Darwin 9.7%, Sydney 8.6%, Canberra 6.7%, Brisbane 5.2%, Perth 4.1% and Adelaide 3.1%.
Overseas markets are also recovering, although slowly and in patches. Let’s use the US as an example. Based on the First American House Price Index, house prices fell 23.6% from peak to trough and have since rebounded 5.7%. That’s an improvement, but a small one, and gains are not happening everywhere – it’s the same in the UK.
Take New York – a quintessential finance town just like London, where property values have dropped by as much as 40% in Manhattan with no growth expected for two years. A triplex that could have fetched USD20 million in 2006 is now priced at USD12 million and likely to sell for less.
Asia is doing a little better with up to 10% growth in house prices in the June quarter alone. The markets likely to recover best include Kuala Lumpur, Singapore, Hong Kong and Jakarta. Analysts over there say the 1997 Asian Financial Crisis had a much greater impact than the GFC. Buyer confidence in the property sector is improving in line with general consumer confidence as the local regional economy follows the US into recovery.
One of the key differences between Australia’s residential property market and those of other major developed nations is supply and demand. The US has way too much property available to the small number of buyers brave enough to venture back into the market. In Australia, we have a shortage that is now estimated to be around 200,000 homes.
The other differences are the strength of our financial sector and general economy, our record population growth and our better than expected unemployment rates.
And things are only going to get better for us. The International Monetary Fund (IMF) says we’re likely to be the only advanced economy in the world to record real GDP growth this year – around 0.7% and rising to 2% next year. Its average projection for all advanced economies is minus 3.4% in 2009 and 1.5% growth next year.
We’re often referred to as the ‘lucky country’ but there’s a lot more than luck making our property market run hot. As we move towards the end of 2009, my outlook for 2010 remains extremely positive. The most interesting element will be the impact of investors – this important pool of buyers can make the difference between a good market and a booming one…and investors are definitely coming back to real estate.”
RE/MAX Property Associates was lucky enough to have Senior Sales Agent, property expert, and Partner of McGrath Real Estate Agents, Adrian Bo, speak at a recent seminar. Adrian is recognised as one of Australia’s top sales agents and auctioneers, he has received multiple awards within the McGrath Group for customer service and excellent sale results and is a respected real estate speaker, asked to present at the annual Australian Real Estate Conference (AREC) on four occasions.
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