Australian Property Market, through the eyes of a South African - Jan 2009

Scott Picken, CEO of IPS has just spent 4 weeks in Australia exploring the Australian Property market. There is allot of global turmoil in property, but there are some very interesting characteristics of the Australian Property Market.

Scott has written a report about the market and he says, “Although this needs to be very detailed and thorough, I will try and focus on the most pertinent points which I believe are essential in understanding the market there.” Please Click here to download the full version of the detailed review of the Australian Property Market through a South African's eyes.

Briefly, like South Africa, the Australians know that there is tremendous global uncertainty, and because of this and lack of available credit, things have slowed, but it is not as dire and as negative as the US or UK markets. They have 4 of the top 15 most secure banks in the world, which brings stability to the market and the government initiatives have created the desired effect of stimulating demand. An example of this is the government has doubled the First Time Buyers Allowance and as long as First Time buyer buys before the 30th of June 2009 they get $21 000 (new build) or $14 000 (existing) and this has created huge demand in this sector.

This, along with the fact that interest rates have dropped 30% over the last 3 months (now 4.25% from over 8%) has vastly improved affordability, which is stabilising the market. They are expecting further drops in interest rates in February.

However across Australia the gap between property supply and demand continues to grow. Supply continues to decrease based on current market conditions - over the year ending June-08 approximately 157,000 new dwellings commenced construction (in Nov 08 building approvals were only 115 000); well below the 200,000 dwellings estimated to be required by the Commonwealth Treasury. In fact, this is around 43,000 too few dwellings being built over the year and getting worse. Australia’s permanent population growth is near record levels, increasing by just under 320,000 people over the last twelve months with more than half that growth coming from overseas migration. This is also examined in contrast to unemployment and the effects it might have.

In conclusion, Australia is being affected by the global situation, but they have strong fundamentals and a government which has a surplus budget and therefore can implement stimulus packages which are having a strong effect on the market. It is very clear where the market activity is and where both the growth and rental market is placed and we believe an investor should be focusing between £300 000 and $600 000, either inner city apartments or houses which are in strategically good locations.

Click here to download the full version or go to www.ipsinvest.com and search under Australia and Documents.