5 February 2009

In this issue:

1. 2009: What a great year to be in Australian landlord!

2. Australian house values hold up: Capital growth figures for 2008 now released.

3. Employment figures remain at record highs.

4. The Key Is Interest Rates.

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1. 2009: What a great year to be in Australian landlord!

Certainly, 2009 will be a great year, to be an Australian landlord, if you already own property there.

If you own an investment property, it is our opinion that it would be best to hold on to any property you have as rents are continuing to rise, and are likely to continue to rise upwards for some time.

In addition, interest rates are falling, migration is strong, rental occupancy rates are at all-time highs, and employment remains at over 95%.

Population growth helps fuel property growth.

Unlike the US, Australia has a large shortfall (rather than an oversupply) of houses.

Foreign investors are increasingly being drawn to Australia as a 'safe haven ' and the lower Aussie dollar is attracting them into acquiring Australian assets. The drop in the dollar has meant an 20-30% reduction in purchase price for overseas investors.

If you already own property, keep in touch with your rental agent to ensure you are achieving now the correct rent increases.

(If you own property in marginal locations, country towns, or out of the way locations, you may not see the rent increases we refer to here that have been achieved in the major capital cities)

At Citylife, we have teamed up with one of the best property managers in Australia to ensure our clients and data base customers get the most professional service and achieve the highest market rent.

If you are thinking of changing your rental agent, and want further information, simply register your name at.

www.Citylifeproperty.com/pp_34.asp

2. Capital growth figures for 2008 now released

The eagerly awaited capital growth figures for the 2008 year in all Australian cities have now been announced, with Australian house prices in all cities holding up.

There are several different sources that monitor the figures, including Residex, Australian Property Monitors, and RP Data/Rismark. All sources used different criteria to monitor house and apartment prices; however, the trend between all these is similar.

Here is the initial information we have been able to obtain. The recent interest rate cuts in 2008 as well as the first home buyers grant have supported the market with the bearish forecasts of 2008 some made not coming to fruition.

The interest rate cuts plus high employment of 95.5% (a 28 year high) meant little evidence appearing of any major price drops in prime locations.

For the year ending December 2008 Australian Property Monitors (APM) showed Australian house prices rose in 4 cities, and dropped in three cities.

In Melbourne, house prices were up 0.9% according to APM while Residex showed Melbourne houses, down 0.9%. Apartments in Melbourne rose 31% on Residex data, and dropped 1.5% on APM data.

In Brisbane, it appears there is more discrepancy in the figures. According to Residex, Brisbane apartments rose 7.1% in the year to December 2008, yet APM data shows a fall of 6.5%. Houses in Brisbane showed a 3.6% gain for the year, according to Residex, and a 0.4% gain, according to APM.

Adelaide houses rose 4.7% (Residex, or 2.9% (APM) and Adelaide apartments rose 27% (APM) and 7.3% (Residex).

Perth appears to have suffered the biggest falls with APM data showing house prices down by 7.9%, and apartments by 4.7%. Residex data also shows apartments down by 4% and houses by 1.3%.

Sydney house prices were down by 4.2% and apartments down 3.8%. Residex data showed Sydney houses down 4.2% and apartments a fraction at 1.4%.

According to RP Data, who also monitors house prices, they showed on their national property index that house prices around Australia dropped notionally by 2.8% for the year.

Tim Lawless from RP Data stated that the notional drops shown above mostly occurred prior to June 2008, when interest rates were at their peak.

Macquarie Group interest rate strategist, Rory Robertson, also agreed that much of last year's house prices drop occurred when mortgage rates peaked. The stated that some bearish predictions at Australia house prices could fall up to 30% were ' is ridiculously far-fetched ' as mortgage rates are coming down dramatically, and the population is growing much farce than the number of houses being built.

It is interesting also to note that while APM's official data shows Perth house prices "down" for the year 2008 by nearly 8%, some suburbs in Perth such as Cottesloe soared 25.7%, followed by North Beach with an increase of 23.8%. These suburbs were followed by Attadale up 19% and Swanbourne up 18.6%, so as always, one must be careful when considering overall statistics for a large area, as pockets and certain locations could well be different.

3. Employment figures remain at record highs.

In spite of some sensationalist media reports, Australia's employment rate only inched downward in December from 96% employed to 95.5%.

This remains at the highest employment rate at any time for the past 30 years since 1978. (See Employment Graph at:

www.citylifeproperty.com/pp_33.asp)

Sections of the media appear to have forgotten that Australia's unemployment rate was over 9% in the early 1980s, and over 10% in the early 1990s and has been above 5% for the past 30 years, until recently when it dropped to an all time low.

There would have to be a very significant drop in the overall employment rate for the property market to be strongly impacted.

4. The Key Is Interest Rates: 50% drop in interest payments

With interest rates coming down by 1% on February 3, and more drops expected, investors are suddenly finding that their holding costs of an investment property have dropped 16% instantly, and if there is another 1% drop will have reduced bank interest payments by over 50% since last year.

(Next issue: Highest rental returns ever seen in Sydney; cash flow positive; and why Australians are buying now)

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