2007: Year In Review
Every year there are always a few real estate issues that provide for great dinner party conversation. This year these issues included environmentally friendly renovations, home loan affordability and rental vacancy rates. One topic we couldn't stop talking about was the demand for mid-priced houses and luxury apartments.
While first home buyers in our region are undoubtedly doing it tough (as they are in all areas of Sydney) over the past year we have found that there are still a reasonable number in the marketplace keen to purchase their own personal slice of the Inner West. Conveniently located units under $500,000 proved very appealing because they can take advantage of the Government incentives like the first home owners grant and zero stamp duty. While professional couples make up the majority of first home buyers in our region there has been a growing number of siblings and friends purchasing together. Home ownership is part of that great Australian dream and is also a sound long term investment and it's enlightening to witness how strong willed many young people can be when they really want something.
The much publicised ‘rental crisis' hasn't eased in the past 11 months. While this is good news for new property investors and existing landlords because vacancy rates are very low and rents high, it is proving sadly frustrating for a lot of tenants. In our region the rental vacancy rate throughout the year averaged around 1.0 – 1.2%. It is true that there are queues of potential tenants waiting outside newly listed rental properties and this likely to worsen in the New Year as people move to start new jobs, school and university. While in previous years our Property Managers may have received one, or maybe two tenancy applications, we now receive four or five applications for each property. This gives us the choice to select a better quality, long term tenant which is great news for our landlords.
Low rental vacancy rates and increased rents has had a positive impact on the number of investors returning to the marketplace over the past 11 months. In the last couple of years investors turned away from property with the introduction of the vendor duty (now abolished) and removal of the land tax threshold (since amended) and purchased property interstate or invested in shares. The later half of the year has seen a growing number of investors return to property. While this will help ease the rental crisis slightly, the numbers are no where near strong enough to ease the rental crisis.
The one thing that has kept us talking all year is the demand for mid-priced houses and lifestyle properties, such as waterfront apartments and units in resort style developments, in our area. Values have increased on average around 5% per cent and up to 10% in some areas which has pushed values up to 2003 levels. The demand from buyers is overwhelming and we only wish we had more stock to satisfy them. Typically buyers in these price ranges have a large deposit sourced from the capital gain of their current home and a steady income source so are less affected by rate rises and other economic factors. We believe the demand for houses and lifestyle properties will continue into the New Year and help push prices higher.
Climate change has had a profound effect on how many of us think about our home environment over the past year. Drought tolerant gardens, water tanks, energy saving appliances and natural heating and cooling options moved to the top of a lot of buyer's wish lists this year. In fact, the water and energy saving features of a home are something we now heavily promote when marketing a property for sale. No doubt this will carry through to 2008 and beyond.
So what's in store for next year? No doubt much of the same for the first couple of months at least. We envisage the housing market will remain very strong and demand will continue to push prices upwards. The rental crisis will continue unabated until action is taken on a State and Federal level. Continued low vacancy rates and high rents should attract more property investors which will help ease demand a little. And finally, assistance should be on the horizon for first home buyers in the form of the Rudd Labor Governments election policy in the form of a superannuation style low tax First Home Saver Account.