CITYLIFE INVESTOR NEWS

The Australian Investor and Property Buyers Newsletter

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5 January 2010

In this issue: -

1. Australia's healthy home market

2. Sydney house prices surge a record 12%

1. Healthy home market

Australia's housing market ended the year well despite recent interest rate hikes, talk of recession, and the phasing out of the first home buyers' grant.

Over the first 11 months, home values rose by 11.3% after their modest 3.8% peak to trough falls in 2008.

The data was compiled by property RP data and Rismark International. Christopher Joye, managing director of Rismark International said the figures indicated the Australian market was less sensitive to interest rate rises and the government stimulus than previously thought.

'The story here is we saw quite spectacular growth in contrast to the quite pessimistic predictions ' he said ' the key driver of Australian housing demand in the latter half of the year appears to have been upgraders and investors. We expect this trend to continue in 2010.'

SQM research managing director and property experts Louis Christopher said he believed renters were in for a rocky year with rents set to continue rising.

'Rents continue to rise in 2009, particularly in the median to affordable end of the market, and I expect that to continue into 2010, I wouldn't be surprised if rental growth tops 7%' he said.

'Holiday homes and prestige property will see a major return and will be the best performers. The affordable end will still record growth but not as robust. Nationwide we are going to see 4% to 6% house price growth as an average in 2010' he said.

Real estate Institute of Australia president David Airey said that despite the prospect of further interest rate rises this year, he was optimistic buyers would continue to return to the market.

'Australians' have a passion for real estate. Although we've been through a huge storm following the financial meltdown, many think we got out of that fairly easy' he said 'and buyers are looking out for property'

2. Sydney house prices surge a record 12%

SYDNEY house prices enter the New Year at record highs after surging an extraordinary 12 per cent through 2009.

Land Titles Office figures compiled by the research company RP Data show a typical Sydney house that sold for $554,800 in early 2009 fetched between $600,000 and $655,000 towards the year's end.

The $655,000 figure - a record - is the median price for November. RP Data warned that median monthly prices were volatile and said a better guide was to examine a range of median prices over a number of months.

Sydney's price rise of 12 per cent in the 11 months to November more than offset the slide of 5 per cent during 2008 after the global financial crisis. It was eclipsed only by Melbourne's rise of 17 per cent, Darwin's 15 per cent and Hobart's 14 per cent. Prices in Brisbane and Perth rose a more modest 6 per cent.

The price of a typical Sydney apartment increased 11 per cent. Importantly, prices continued to rise in October and November despite back-to-back interest rate rises in those months and the decrease in the first-home owners' grant towards the end of the year.

'First-home buyers have been trending down since peaking in May,' RP Data's research director, Tim Lawless, said. 'But the gap is being filled by upgraders and investors who are much less sensitive to price.' Other credit figures showed borrowing for housing up 0.7 per cent in November and 8 per cent over the year.

The CommSec chief economist, Craig James, said the resilience of the housing market increased the chance of another interest rate rise when the Reserve Bank board meets in February.' Mr. Lawless said he expected more modest house price growth in 2010.

' We would expect conditions to moderate...... but the primary driver of growth will continue to be a an undersupply of housing, coupled with extraordinary demand fuelled by population growth.'

The median price rises: (Source RP Data)

Melbourne 17%

Darwin 15%

Hobart 14%

Sydney 12%

Brisbane 6.9%

Perth 6.5%