New housing boom tipped for second half of '09

AAP


Low interest rates, population growth and a shortage of new home construction is the perfect mix for a fresh house price bubble, says Firstfolio chief executive Mark Forsyth.
Australian might be on the brink of recession but Mr Forsyth believes a new housing boom could begin as early as in the second half of 2009. "If you combine the last rate decrease with news that there's going to be another decrease, rental yields going through the roof, shortage of supply of property and the first home owners grant, it's a perfect storm of a positive nature," Mr Forsyth told AAP. "We're creating the next housing boom, or bubble potentially."


After the Reserve Bank of Australia cut the overnight cash rate to a 44-year low of 3.25 per cent in February, traffic at Firstfolio's mortgage website eChoice more than doubled to 15,000 hits a day from 6,000, Mr Forsyth said. While the demand for loans had grown, especially among first home buyers, Mr Forsyth said he feared there weren't enough properties where people wanted to live - in transport corridors and close to employment centres. And building approvals for dwellings fell in January for a seventh consecutive month to the lowest level in eight years, according the Australian Bureau of Statistics.


The ABS also showed rents rose by 8.4 per cent for the year to December, the fastest increase since 1989, making property investment more attractive. The shortage wasn't likely to be solved soon as new developments took a long time from start to completion, and the population continued to grow, particularly through immigration, Mr Forsyth said. Immigration Minister Chris Evans announced last year that Australia would increase its annual immigration intake to about 300,000. "Unless somebody has it on tap now, we're not going to have any new development," Mr Forsyth said.



First Home Loan Specialists Comment:


The article above highlights that the property market has very good fundamental drivers going forward. These drivers should underpin housing prices in the longer term and provide some stability to the market. However, the short term boost for these drivers is the First Home Owners Scheme (FHOG) provided by the Commonwealth government.

Some evidence of the increase in the FHOG was reported in Weekend Australian Financial Review (March 14-15, Page 5, Scott Elliott & Michelle Singer) here it is reported that First Home Buyers are rushing to take advantage of generous government handouts before their June 30 cut-off. This rush was further supported by Queensland property developer, Devine reporting its best new-home sales in seven years after it agressively pursued the first home buyer market.

The article also reports that the Government will not commit to its boost beyond the 30 June 2009 cut off date.

So currently First Home Buyers have a little over three months to make their decision on whether they will climb onto the property ownership ladder. Now is the best time for a number of years to be buying their first home and make sure they take advantage of this current assistance package.

Greg Brierley
Principal