Australia Faces Its Demons

[quibble]

You are, of course, completely right. I should have used the White Colonist term and said "Abos", and not "Aborigines". Wont happen again, Bruce.0

It's really sad to find out about the oldest, and perhaps strongest, culture Australia has on the the dreaming trails around Uluru (Ayres rock); then watch the fat retirees turn up in coaches, ignore the locals' requests not to climb it, then merrily drive away again.

[aussieboy]

Meanwhile, in the non-FTB market in Sydney's Eastern Bubs I get my regular email from the estate agent pitching to sell my place there should we decide to move:

"Another exciting night in the auctions room last night-we sold 8 out of 9 (see attached results). [indeed, the selling prices were included and they looked quite "good"]

All of my properties sold over reserve and it was exciting to see 5-6 buyers on every property and plenty of bidding.

It is certainly a good time to be selling given the lack of properties on market compared to the number of buyers-for all types of property.

Obviously the next motivating factor for buyers will be to buy before the end of the financial year!

Call me to discuss any of the sales listed further."

Sure, she's pitching for business, but I've been receiving these emails for that last nine months and things were very sticky H2 last year judging by the emails she was sending me then. BTW this is not good news for me (ex the fact that liquidity looks better) given that I'll be looking to trade up.

Autumn bounce anyone?

[Bardon]

Betting on the house

Paddy Manning

May 14, 2009

THINK house prices here are going to fall? Soon you'll be able to short-sell Sydney housing, by taking out a derivative contract based on indices compiled by Rismark/RPData and quoted daily on the sharemarket.

It's a world-first for the ASX, which means institutional and retail investors can get exposure to housing-like returns - positive or negative - without owning a home.

It's a financial product likely to attract banks anxious to hedge against the risk of falling property values undermining the value of their mortgage books.

It's also likely to attract high-profile bears such as the University of Western Sydney professor Steve Keen, who thinks house prices will fall by up to 40 per cent, peak-to-trough.

So far Australian house prices have not suffered the dramatic slump seen in the US and Britain, dropping only 6.7 per cent in the year to March, according to an ABS estimate across eight capital cities.

Debate is raging: will lower interest rates and the apparent undersupply of dwellings continue to support prices here, or will they collapse as unemployment rises and recession bites? Australian house prices are among the most expensive in the world, relative to income.

Now the pundits can put their money where their mouth is. Of course, anyone bullish on property can punt the contracts too, by going long - and derivatives could offer those saving for a house a property-like return before they can afford to buy in the physical property market.

The contracts will pay a rental income - just like a property investment - but this will be offset by interest expenses, as the positions offered initially will be geared. Which also means holders of the contracts could end up owing more than they invested, if their bet goes wrong.

The ASX property indices - offered over a national house price index, and one for each of the five major capitals - will not be based on median prices or recent sales but on a representative sample of properties in each market, compiled by Rismark/RPData. Eventually, contracts could be based on regions within each city - statistical divisions, most likely - but the data is not fine enough to allow bets on an individual suburb. Futures contracts could also be written.

Contracts will not be priced continuously but once a day, through the same single-traded auction price method the ASX already uses in the futures market.

It's a fascinating proposal, which has been under development for five years. The derivatives will be launched in August-September, if regulatory clearance is obtained from the Australian Securities and Investments Commission.

http://business.smh.com.au/business/bettin...90513-b3cs.html

[HAMISH_MCTAVISH]

All just goes to show how successful the right policies can be in supporting the housing market.

Australia has done really well out of this. Labour should learn a lesson or two from our Antipodean cousins about how the right interventions at the right time can avoid catastrophe.

[carbonoid]

All just goes to show how successful the right policies can be in supporting the housing market.

Australia has done really well out of this. Labour should learn a lesson or two from our Antipodean cousins about how the right interventions at the right time can avoid catastrophe.

You're related to a kangaroo?

[mattyboy1973]

All just goes to show how successful the right policies can be in supporting the housing market.

Australia has done really well out of this. Labour should learn a lesson or two from our Antipodean cousins about how the right interventions at the right time can avoid catastrophe.

what - bailing out property investors, who are selling en mass to naive young first home buyers, and creating a sub-prime time bomb to hit in a year or so, at precisely the same time as the rest of the economy has hit rock bottom?

[Venger]

what - bailing out property investors, who are selling en mass to naive young first home buyers, and creating a sub-prime time bomb to hit in a year or so, at precisely the same time as the rest of the economy has hit rock bottom?

Everybody knows (except Hamish)

I don't follow this thread so closely. Have you seen this on YouTube?

Poor kids. They look so happy with their shiny new house. Encouraged to buy at such high prices with this grant incentive.

[mattyboy1973]

Independent market analyst Datamonitor found that almost a quarter of mortgage holders were experiencing mortgage stress, with first-home buyers who bought in the past 12months especially vulnerable.

Thirty per cent of these new buyers said they were facing mortgage stress, while 21 per cent expected they would have difficulty paying back their home loan over the next five years.

that, to me, is astonishing. These figures were bandied around the press last week. Right now, with 40 year low itnerest rates, 21% of first home buyers think they will have trouble paying their mortgage in 5 years. What are they hoping will happen within the next five years to make this easier?

This is a serious problem that will hit Australia within the next few years - an extra an unnecessary problem entirely manufactured this and the preceding governments.

[Bardon]

All just goes to show how successful the right policies can be in supporting the housing market.

Australia has done really well out of this. Labour should learn a lesson or two from our Antipodean cousins about how the right interventions at the right time can avoid catastrophe.

I am far from being a labour supporter or a big fan of the reserve bank but it would be hard to challenge the fact that so far between the two of them they have manged to avoid a crash in the housing market.

Edited May 14, 2009 by Bardon

[mattyboy1973]

I am far from being a labour supporter or a big fan of the reserve bank but it would be hard to challenge the fact that so far between the two of them they have manged to avoid a crash in the housing market.

The Fed and George Bush between them managed to avoid a crash in the US housing market until 2007

[bear_or_bull]

I am far from being a labour supporter or a big fan of the reserve bank but it would be hard to challenge the fact that so far between the two of them they have manged to avoid a crash in the housing market.

In the same way I have avoided going to the dentist for my dodgy wisdom teeth. In the long run it's gonna cost me.

The government and RBA are busy eating sweets and supping on the sugary koolaid when they should be flossing and scraping.

[Bardon]

In the same way I have avoided going to the dentist for my dodgy wisdom teeth. In the long run it's gonna cost me.

The government and RBA are busy eating sweets and supping on the sugary koolaid when they should be flossing and scraping.

No they dont need that as they have their body weight in "InflationGuard" mouthwash on order.

[Peter Hun]

All just goes to show how successful the right policies can be in supporting the housing market.

Australia has done really well out of this. Labour should learn a lesson or two from our Antipodean cousins about how the right interventions at the right time can avoid catastrophe.

Crapping yourself are you? Your catastrophe is another persons oppertunity.

You probably though that while buying some over priced house - which explains your insane posting history.

[Bardon]

Its been a real busy week for me I have been down in Sydney the big smoke what a place the most beautiful women in the world for the moment anyway. Just got home and its kiddy’s party and work barby weekend great what a break.

Okay so what does the budget mean to me from a residential investment point of view. Big deficit predicted for a few years has to mean no growth.

FHOG boost gets toned down in Oct then back to normal in Dec 10o.

Starter home prices will continue to rise up until OCT then flat line for a long times. As will all house prices.

If you hold any dogs goodtime to punt them to a first home owner..

Otherwise your are going into the hold phase of the buy and hold which is part of it.

Don’t buy anything new unless its cash flow +ve until growth kicks off again.

No crash but a bit of short term downside in first home owners market early next year

[Bardon]

This project will be a big one if it gets the green light and BHP are confident that it will get the go ahead.

Giant BHP pit is an open cheque for growth

May 14, 2009

Article from: The Australian

IT'S not often that a single project has the power to create hotspots in five or six locations.

The BHP Billiton plan to expand Olympic Dam to create the world's biggest open-cut mine has that potential.

Major new infrastructure will be built at Port Augusta, Whyalla, Adelaide and Darwin, as well as in the mining town of Roxby Downs.

BHP Billiton has just published its draft Environmental Impact Statement, which runs to 4600 pages (I suspect they hope no one will read it), but the executive summary is more palatable, even if it's long on economic details and short on environmental impacts.

The project needs approval from state, territory and federal governments, which BHP hopes to have by the middle of next year. It's likely to have politicians bending over backwards, forwards and sideways because it promises to generate 8900 jobs at its peak and increase government royalties fourfold.

The dimensions of this undertaking are mind-numbing. The expanded project will need a power station, desalination plant, airport, construction village accommodating 10,000, new rail links, pipelines for water, power and gas, extensions to the existing smelter, and new processing plants.

The construction phase will take 11 years, creating a pit 4.1km long, 3.5km wide and 1km deep. The rock pile from five years of removing overburden will be 150m high with a footprint of 6720ha.

The operation is already big: it accounts for 10 per cent of South Australia's baseload power demand. The expanded operation will be six times larger.

The existing operation uses 37 megalitres of water daily and the expanded mine will need an extra 216 megalitres. Electricity demand will rise from 125MW to 650MW. Transport volumes of supplies and product to and from Olympic Dam will increase fivefold.

The current operation contributes $1.7 billion each year to South Australia's gross state product. The expanded operation will create $6.9 billion more in an average year.

Today, Olympic Dam is an underground mine and BHP wants to convert it to open cut to improve access to the available resource.

The mine is just outside Roxby Downs, 560km north of Adelaide, and has the world's largest remaining copper-gold deposit, as well as the largest known uranium resource.

This mega-project has repercussions for real estate in multiple locations. The plan promises new jobs at Port Augusta, Whyalla, Port Adelaide and Darwin, and therefore increased demand for housing, as well as new industrial, commercial and retail real estate.

It includes a desalination plant at Point Lowly near Whyalla, with a 320km pipeline to provide 200 megalitres of water daily to the mine.

The operation will need a new landing facility near Port Augusta to unload equipment from ships, plus an access corridor to a pre-assembly yard at Port Augusta. There might also be a 270km electricity transmission line to the mine from Port Augusta to partly satisfy power needs.

New bulk loading and storage facilities will be built at Adelaide's port, while the Port of Darwin's East Arm will need upgrades to existing storage, handling and loading facilities.

A new 105km rail line will be needed to connect the mine to the national rail network, with an intermodal facility at Pimba.

"This project will revitalise Port Augusta and Whyalla," says Adelaide property investment lecturer Peter Koulizos. "They will be like the phoenix rising from the ashes."

There will be plenty of construction activity in and around Roxby Downs, where the permanent population will more than double -- from 4500 to 10,000. That's in addition to the temporary construction village. The existing airport will be replaced by a new one able to handle Boeing 737-800 and Airbus A320 aircraft.

BHP proposes to build a 250MW cogeneration power station at Olympic Dam, while expressions of interest have been sought to supply the remaining power needs.

It's difficult to assess what all this will do to house prices in Roxby Downs. Much of the construction workforce will be accommodated in a temporary village outside Roxby Downs, while the increase in the long-term operating workforce will be absorbed through creation of new permanent homes.

The construction workforce will average 4000 over 11 years, peaking at about 6000 construction workers in 2015-16.

Meanwhile, the permanent workforce to operate the expanding facility will grow steadily to in 2016 and 4000 in 2022.

The town's draft master plan allows for new subdivisions, expanded education, health and other community services.

BHP says in the draft environmental impact statement: "Several mechanisms are proposed to encourage the availability and affordability of accommodation for the expanded operation, with the aim of establishing long-term house prices reflecting the stable demand of a long-life industry."

This includes provision of 2500 new residential allotments, building sufficient houses to achieve a 5 per cent vacancy rate, and erecting the construction village.

Roxby Downs has already had a prolonged property boom, with houses typically costing well above $400,000.

Until recently it had four consecutive years when prices grew more than 20 per cent.

"While increased demand usually means increased prices, there will be increased supply as well," Koulizos says.

"But I look at the past, in places like Karratha and the mining towns of western Queensland, where there have been periods when house prices and rents have skyrocketed because supply couldn't keep up with demand. Keep in mind that South Australia only builds 10,000 new homes a year, at best. South Australia can't handle this on its own."

Adelaide land prices soar

May 16, 2009 12:01am

ADELAIDE has recorded the biggest jump in land prices of all mainland capital cities in the past year, putting it on par with Melbourne.

The average cost of a block of land in Adelaide for the December, 2008, quarter was $152,000 – up 14.3 per cent on the 2007 figure of $133,000.

http://www.news.com.au/adelaidenow/story/0...09-2682,00.html

[aussieboy]

And in the meantime, another buyer's agent letter arrives in my letterbox.

Overall, I think you're right bardon. Bugger all nominal growth, real negative growth for a while... just like it has been round my way for the last 3 or so years.

[Ruffneck]

thanks for the article bardon , i didnt realise mining uses so much water

37 megalitres per day just for olympic dam? what they trying to do fill it with water?

though this won't create many jobs , it will be a case of people moving from closed BHP mines like Ravensthorpe to Olympic dam.

[Bardon]

thanks for the article bardon , i didnt realise mining uses so much water

37 megalitres per day just for olympic dam? what they trying to do fill it with water?

though this won't create many jobs , it will be a case of people moving from closed BHP mines like Ravensthorpe to Olympic dam.

If it goes ahead in addition to the direct employment through construction and operation there will be significant indirect benefits to the local economy. You have all the project management staff locating to Adelaide snapping up rentals, some buying, high disposable income, Adelaide would get a serious shot in the arm if this goes ahead. We are tracking some fabrication shops and would consider buying if the expansion gets the green light. So in this scenario the local commercial market heats up with the additional benefit of increased work going through the premises. This would be repeated right across Adelaide with local suppliers benefiting from the increased demand for products and services.

Some interesting articles below on Sydney rent still increasing even though massive first home buyer exodus from rentals. This will only keep the momentum up for first home buyers as ownership is an economic alternative to renting. Also investors look like some signs that they are returning in small numbers with stronger yields and low IR's.

If the first home owners suddenly stop buying because they are priced out or they are waiting on prices to fall then this can only keep the pressure on rents so its two bob each way for those property investors on long term buy and hold strategies.

Rent increases exceed wage growth

Print May 16, 2009

Article from: Australian Associated Press

SYDNEY rental prices continue to rise, exceeding wage growth, a New South Wales Government housing report shows. Housing NSW's Rent and Sales report shows the median rent for all dwellings in Sydney had gone up by $5 to $390 in the March quarter, or the first three months of calendar 2009. Overall, the median rent for all dwellings throughout the state was $325, down 1.5 per cent over the quarter, but up by 8.3 per cent over the year.

NSW Housing Minister David Borger said rent increases were still exceeding wage and consumer price index (CPI) growth. The report showed western Sydney was the cheapest area in which to rent, while the most expensive areas were the northern and eastern suburbs. The cheapest one bedroom rentals were in Blacktown and Bankstown areas, with a median rent of $180 a week; Fairfield at $185 a week and Liverpool at $188 a week. The most expensive one bedroom rentals in Sydney were in Willoughby, in the city's north, with a median rent of $430 a week; Canada Bay, in the northwest, at $420 a week, followed by Waverley, Woollahra and Manly at $400 a week. The cheapest place to rent a four-bedroom home in Sydney was in Campbelltown, with a median rent of $360 a week, compared to $1300 a week in Mosman and Waverley.

“Worryingly, we are seeing rents rise in some rural and regional areas in NSW,” Mr Borger said. For all two-bedroom dwellings, the median weekly rent was up by 15.4 per cent in the central Macquarie area annually, 11.1 per cent in Clarence, 10.5 per cent in Wagga Wagga and 8.1 per cent in Orange. House prices fell for all dwellings across Sydney by 2.9 per cent over the three months to December 2008 and by 12.3 per cent over the year. Western Sydney is also the cheapest place in which to buy a house, with the median price of all dwellings in Campbelltown at $280,000 in the December quarter, compared to a median price of $833,000 in Woollahra

.

The first home price boom

May 17, 2009 12:00am

THOUSANDS of first-home buyers will be priced out of the market within the next few months, experts have warned. The lowest interest rates in almost 50 years, combined with an extension of the beefed-up First Home Owner Grant, have provided ripe conditions for young buyers. But analysts say investors will flood the market after the grant is halved on September 30. Prices, already inflated at the bottom end of the market, will rise further. Will you buy now or wait until after the grant runs out? Tell us in the feedback form below.

SQM Research managing director Louis Christopher said the housing market appeared to be recovering, but was far from the highs seen earlier this decade. He said there were signs that prices would start to rally: "There's some evidence that investors are coming into the market. If they come in strength, we will see price rises - there's no doubt about that.'' His views are in line with Treasury estimates. "Dwelling investment is expected to remain flat in 2009-10, before staging a solid recovery in 2010-11, with growth of 11.5 per cent,'' Budget papers said.

Federal Treasurer Wayne Swan last week revealed that the First Home Owner Grant would be extended beyond its previous June 30 deadline. People buying a first home before September 30 will receive $14,000 for established premises and $21,000 for a new dwelling. From October 1, these grants will be cut to $10,500 and $14,000, respectively, before both return to $7000 from January 1. Australian Property Monitors economist Matthew Bell said market conditions were ideal and there was no better time to buy.

"Now is a good time for first-home buyers,'' he said. "You're not going to get interest rates this low for a long time and they will probably still be around for another year.'' But he urged buyers to ensure they can meet loan repayments, when interest rates increase. Urbanstyle Homes director George Manojlovski said he was worried about how the industry will cope once grants are cut. "It's going to be a bit tough, but it depends on the proportion of work each building company devotes to first-home buyers,'' he said. First-home buyer Ben Settree, one of thousands expected to scramble for a home before October, said prices were inflated, but he wanted to take advantage of the government incentive.

http://www.news.com.au/dailytelegraph/stor...5006010,00.html

[Bardon]

Housing at its most affordable for 7 years

By Terry Ryder, 18th May 2009

Home affordability took a further leap in the March Quarter, following a big improvement in the December Quarter, to reach a seven-year high. It means typical first-home buyers now have monthly mortgage payments $1,000 less than 12 months ago.

The household income required to qualify for the typical first home is now $40,000 less than a year ago. The HIA/Commonwealth Bank First Home Buyer Affordability Index improved 14.6% in the March Quarter. The index is at a level 66% higher than in the March 2008 quarter.

The big improvement resulted from further reductions in mortgage rates and further moderation in house prices. The monthly loan repayment needed on a typical first-home mortgage fell from $2,056 to $1,831, a fall of 11% in the March Quarter. Monthly mortgage repayments accounted for 17.1% of total first home buyer income, down from the 19.6% in the December Quarter.

The 14.6% improvement in affordability for the March Quarter followed a 40% rise in the December Quarter, as the first in the series of interest rate cuts since August 2008 were factored into the affordability index.

The raw data shows that in March 2008 the median first home price was $425,000, typical interest rates were 8.75% and monthly payments were $2,800, which meant households required an annual income of $112,000 to qualify. Today, according the Commonwealth Bank data, the median first home price is $384,000, typical interest rates are 5.2% and monthly repayments are $1,831 – almost $1,000 year than a year ago. Income required to qualify has fallen to $73,200.

The HIA’s Chris Lamont says despite the economic conditions there has never been a better time to enter home ownership. He says further improvement in affordability is expected in the June Quarter. The HIA, in announcing the index results, sought to attribute most of the improvement in affordability to the FHOG boost – but this again is the loud voice of vested interest putting a spin on things. The reality is that lower prices and sharply lower interest rates have created the big improvement in affordability and this is driving first-home buyer activity around Australia.

The report showed that affordability improved strongly in all capital cities and regional areas in the March 2009 quarter. The largest improvement was evident in Hobart, Adelaide and Sydney.

b]RBA governor sees green shoots emerging, slowly[/b]

By Online business reporter Michael Janda

RBA governor Glenn Stevens says Australia is well placed for a recovery, but should not expect it to be quick (file photo) (AAP: Dean Lewins, file photo)

Video: RBA predicts slow recovery (ABC News) Reserve Bank governor Glenn Stevens has told a business breakfast that he can see an economic recovery beginning by the end of the year.

Mr Stevens was speaking at a forum hosted by the Canadian-Australian Chamber of Commerce, and told those present that there are positive signs that the bottom of the downturn is nearing. "It is too soon to say this is the beginning yet, though developments over recent months are certainly consistent with the view that a recovery will get underway towards the end of the year," he said in his speech. Mr Steven also backs Treasury's budget projections of strong growth once Australia does fully swing into recovery. "It is, I think, quite feasible to expect above average growth for a number of years," he said.

However, the news is not all good, with the recovery still expected to take some time to get into full gear. "Most observers think that the early part of any new global expansion will be characterised by pretty slow growth," he said. The RBA governor also reiterated the well-worn line that Australia is relatively well placed to survive the downturn and make the most of a return to global economic growth. "Both our countries [Australia and Canada] have reason to believe that we will come through this episode in reasonable shape," he said.

However, Mr Stevens has flagged some areas of concern that could hamper any economic recovery. The first of these was a warning against protectionism and trade barriers. "The extent to which trade flows slumped late last year perhaps gives a sense of what could happen were trade barriers to go up," he said. "Everyone would suffer, and badly." He also discussed the need for developing nations to shift away from export-orientated economic growth towards increasing consumption of goods and services within their own countries.

To allow this to happen, he said that the international financial system, and its governing bodies, need to be reformed to give developing nations a greater say. "It is in the interests of many developing countries to alter their growth strategy, but to do so they need confidence in the international system - its rules, governance, safety nets and so on," he said. This reform is necessary to give those nations confidence that they will be supported during a crisis such as the 1998 Asian financial crisis, where many nations felt let down by international institutions and have resorted to large amounts of saving and investment in developed economies as a security blanket.

Housing's controlled descent

One other interesting aspect of the governor's speech was his discussion of the fall in house prices, and the resultant improvement in housing affordability. "The ratio of the median dwelling price to average household income has declined quite noticeably since 2003, without a very large absolute decline in housing prices," he said. "This is evidence for at least the possibility that these adjustments can take place over reasonably lengthy periods and without being terribly disruptive to the economy." Mr Stevens does not mention in the text of his speech that house price to income ratios are still noticeably higher in Australia than Canada, despite several years of decline in Australian housing prices prior to the global financial crisis. A slow death is still a death after all, and one that can be even more painful that a quick cut, as Australia's building industry seems to be discovering.

Edited May 19, 2009 by Bardon

[Bardon]

Home cost relative to incomes falls dramatically

The cost of a typical home, relative to incomes, has fallen dramatically in recent years as affordability continues to improve across Australia. Figures from the Reserve Bank of Australia show that a typical home costs about four times the average household’s annual after-tax income. Five years ago the typical home cost almost six times average household income. The improvement in affordability has been attributed to income growth and softer house price growth.

By comparison, the typical home costs four times income in Canada and three times income in the United States. Reserve Bank Governor Glenn Stevens says the continuing improvement in affordability suggests Australian house prices will not experience the large declines seen in other nations. He says the ratio of median dwelling price to average household income has declined significantly since 2003, but without a large drop in home prices. Stevens says the significant decrease in interest rates is another factor working in favour of home buyers.

The figures provide a further debunking of the view expressed by some economists that Australian home values are too high relative to incomes and must therefore decline to fall into line with other nations.

[Bloo Loo]

Inflation?

[Bardon]

Inflation?

Its coming, last year I thought it was upon us and fixed all my investment loans, win some loose some. Teachers on strike throughout QLD yesterday could be the start of wage demands.

[aussieboy]

Its coming, last year I thought it was upon us and fixed all my investment loans, win some loose some. Teachers on strike throughout QLD yesterday could be the start of wage demands.

Not sure about that. The private sector is still tightening its belt and firing. Plus MPs and senior civil servants have had their wages frozen (again) which I suspect is a prelude to Master Rudd "getting tough" with the rest of the civil service which should keep the wages-price spiral under control.

[Bardon]

Not sure about that. The private sector is still tightening its belt and firing. Plus MPs and senior civil servants have had their wages frozen (again) which I suspect is a prelude to Master Rudd "getting tough" with the rest of the civil service which should keep the wages-price spiral under control.

Yes lots of salary freezes and no bonuses in the construction industry as well. I do think that inflation will be the next big thing though.

More positive news on the affordability front.

Hobart tops Australia's most affordable list

21/05/2009

Housing affordability has improved the most in Hobart, making it the most affordable capital city during the March quarter according to a new survey.

The HIA-Commonwealth Bank Affordability Report showed affordability for Hobart improved by 31%, thanks to lower interest rates and lower house prices. This means property owners are now spending 22% less ($372) on their monthly mortgage repayments.

In contrast, Canberra emerged as the country's most unaffordable city, followed closely by Brisbane and Sydney.

"Sydney recorded its best affordability result in 15 years," said Chris Lamont, HIA chief executive. "Sydney's first homebuyer affordability improved by 17% over the March quarter on account of lower interest rates and a 4% drop in house prices."

In Brisbane, affordability levels improved to 2003 levels across the state. Flat property prices and lower interest rates resulted in a 12.5% improvement in housing affordability in the March quarter.

Higher income growth relative to house price increase coupled with lower interest rates helped boost affordability in Melbourne. Over the same period, first homebuyer affordability rose by 13%.

[Bardon]

Australian house prices continue to stabilise in April according to Residex data.

Monthly house price data from Residex continues to point to a stabilisation in prices nationally in April albeit with more notable divergences by state and segment. Overall, the figures point to a slight 0.1% dip in house prices in April. However price growth on a 3mth average basis ticked up into positive territory (+0.3%mth) for the first time since May last year. Mortgage rates continued to fall in April with the RBA's move to cut rates by 25bps bringing the standard variable rate to around 5.8%, a 40yr low.

Most strikingly, units continue to show much more price strength than houses. Nationally, unit prices rose 0.3% in April and 1.8% on a 3mth basis - an annualised pace of over 7%. The rise clearly reflects the resurgence in first home buyer demand since late last year.

Looking across states, March saw house prices down 1.4% in Sydney (flat on a 3mth basis) and 0.8% in Melbourne (+0.7% on a 3mth basis) but up a strong 2.8% in Perth (still down 0.9% on 3mth basis), with solid rises of 0.8%mth and 1.1%mth for Brisbane and Adelaide. The latter remains the strongest market of the major capital cities and the only one where house prices are still up on a yea ago, albeit by just 0.2%.

At the other extreme, Perth remains by far the weakest property market although the latest monthly jump in house prices was the strongest since March last year.

As noted elsewhere, the official ABS house price data was a lot weaker than all of the main private sector measures had suggested in Q1.

That divergence is even starkers with the latest Residex data - whereas the official figures had a 2.2%qtr decline all of the private sector measures Residex, APM, and RP Data-Rismark now show a small positive for the first few months of 2009.